Macroeconomic Forecast RUSSIA

Russian industrial output contracted by 10.8% y-o-y in July, a marked improvement from the -14.8% y-o-y average seen over the first six months of the year. In line with our view that H109 was likely the trough of the recession in Russia (and globally), we believe that the pace of contraction in industrial output will continue to moderate going forward, with our end-year forecast remaining at -5.0% y-o-y. Over the course of 2009, we forecast industrial output growth to average -10.9% y-o-y. While we expect the industrial sector to recover in 2010, with growth pushing back into positive territory, we maintain that trend growth over the long run is likely to settle several percentage points lower than in the years leading up to 2008, with our average annual forecast for 2011-2013 set at 5.3%.

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