Macroeconomic Forecast RUSSIA

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Russian inflation came to 8.8% y-o-y at end-2009, just off of our 9.0% forecast. Going forward, we expect inflation to remain in the single digits though forecast a rise to 9.5% by end-2010. Demand conditions are likely to improve going forward on the back of a steadily improving domestic credit market and tentative global macroeconomic recovery. This in turn, should help to stem the disinflationary trend in Russia, especially as interest rates are likely to remain at historically low levels through the year. Indeed, after cutting its benchmark refinancing rate to 8.75% on December 28, we expect the Central Bank