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Russian Economy Rebounding From Covid Slump After Lockdown – Financial Post

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(Bloomberg) — Russia’s economy continued to rebound from its pandemic-induced recession in the fourth quarter of 2020, easing its contraction as President Vladimir Putin opted against imposing a second national lockdown.

Gross domestic product declined 1.8% from a year ago, the Federal Statistics Service said Thursday. That was less than the median forecast of economists for a drop of 2.2%. The full-year contraction was revised to 3% from 3.1%, the service said, also updating previous quarters.

The economy of the world’s largest energy exporter contracted less than many of its peers last year as Russia imposed lighter Covid-19 restrictions following an initial lockdown. Its service sector is also relatively small as a share of output.

Inflation, sparked by rising global food prices and the ruble’s weakness, accelerated further amid a recovery in consumption, prompting the Bank of Russia to raise interest rates for the first time since 2018 last month, with further hikes likely.

The government will lower its 2021 economic growth forecast from 3.3% after the statistics service’s report of a smaller contraction last year, Economy Minister Maxim Reshetnikov said Thursday, according to Interfax. Performance in the first quarter should be on par with the last three months of 2020, he said.

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What Our Economists Say:

“After a surprisingly small contraction in 2020, the recovery is broadening, fueled by slowing outbreaks, progress in vaccinations and higher oil prices. The virus remains a threat. Normalcy is a long way off, but output could return to the pre-virus peak by the fourth quarter.”

–Scott Johnson, Bloomberg Economics. Read RUSSIA INSIGHT

Russia’s government is winding down pandemic support measures while also planning to boost infrastructure spending this year, including by tapping its $182 billion wealth fund. Finance Minister Anton Siluanov said money from the fund could start flowing in the first half of this year, totaling 1 trillion rubles ($13 billion) over 3 years, or about 1% of Russia’s total output.

At current oil prices, the economy may expand about 2.5% this year, according to Alexandra Suslina, a budget specialist at the Economic Expert Group, a Moscow think tank.

“The economy is slowly recovering,” Suslina said. “Spending from the wealth fund will lift the economic indicators, but won’t bring Russia to a new level of growth. It will be a short-lived impact.”

The ruble’s weakness and the surge in inflation are putting further pressure on Russians’ deteriorating living standards. Real disposable incomes are still about 10% below levels reached before Putin’s 2014 annexation of Crimea that triggered international sanctions.

The government has resorted to price controls on certain food staples to try to rein in inflation, which rose in February at the fastest pace since 2016. Consumer-price growth reached 5.8% as of March 15, the central bank estimated.

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While countries across Europe are experiencing a third wave of Covid-19 infections, pushing some governments toward new lockdowns, Russia continues to ease restrictions as recorded cases decline. Still, an official campaign to encourage mass vaccination has produced little public response so far.

Despite Putin ordering the start of the program in December, only about 4.3% of people in Russia have had a first dose of vaccine, compared to 11% in Turkey, nearly 30% in the U.S. and almost 50% in the U.K.

“While the percentage of the vaccinated population remains low, Russia will remain at risk of a damaging third wave that could hurt recovery prospects,” said Tatiana Orlova, an analyst at Emerginomics in London. “The population’s vaccine hesitancy is, in my opinion, a substantial risk to the near-term economic outlook.”

©2021 Bloomberg L.P.

Bloomberg.com

In-depth reporting on the innovation economy from The Logic, brought to you in partnership with the Financial Post.

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CANADA STOCKS – TSX ends flat at 19,228.03

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* The Toronto Stock Exchange’s TSX falls 0.00 percent to 19,228.03

* Leading the index were Corus Entertainment Inc <CJRb.TO​>, up 7.0%, Methanex Corp​, up 6.4%, and Canaccord Genuity Group Inc​, higher by 5.5%.

* Lagging shares were Denison Mines Corp​​, down 7.0%, Trillium Therapeutics Inc​, down 7.0%, and Nexgen Energy Ltd​, lower by 5.7%.

* On the TSX 93 issues rose and 128 fell as a 0.7-to-1 ratio favored decliners. There were 26 new highs and no new lows, with total volume of 183.7 million shares.

* The most heavily traded shares by volume were Toronto-dominion Bank, Nutrien Ltd and Organigram Holdings Inc.

* The TSX’s energy group fell 1.61 points, or 1.4%, while the financials sector climbed 0.67 points, or 0.2%.

* West Texas Intermediate crude futures fell 0.44%, or $0.26, to $59.34 a barrel. Brent crude  fell 0.24%, or $0.15, to $63.05 [O/R]

* The TSX is up 10.3% for the year.

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Canadian dollar outshines G10 peers, boosted by jobs surge

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Canadian dollar

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar advanced against its broadly stronger U.S. counterpart on Friday as data showing the economy added far more jobs than expected in March offset lower oil prices, with the loonie also gaining for the week.

Canada added 303,100 jobs in March, triple analyst expectations, driven by the recovery across sectors hit by shutdowns in December and January to curb the new coronavirus.

“The Canadian economy keeps beating expectations,” said Michael Goshko, corporate risk manager at Western Union Business Solutions. “It seems like the economy is adapting to these closures and restrictions.”

Stronger-than-expected economic growth could pull forward the timing of the first interest rate hike by the Bank of Canada, Goshko said.

The central bank has signaled that its benchmark rate will stay at a record low of 0.25% until 2023. It is due to update its economic forecasts on April 21, when some analysts expect it to cut bond purchases.

The Canadian dollar was trading 0.3% higher at 1.2530 to the greenback, or 79.81 U.S. cents, the biggest gain among G10 currencies. For the week, it was also up 0.3%.

Still, speculators have cut their bullish bets on the Canadian dollar to the lowest since December, data from the U.S. Commodity Futures Trading Commission showed. As of April 6, net long positions had fallen to 2,690 contracts from 6,518 in the prior week.

The price of oil, one of Canada‘s major exports, was pressured by rising supplies from major producers. U.S. crude prices settled 0.5% lower at $59.32 a barrel, while the U.S. dollar gained ground against a basket of major currencies, supported by higher U.S. Treasury yields.

Canadian government bond yields also climbed and the curve steepened, with the 10-year up 4.1 basis points at 1.502%.

 

(Reporting by Fergal Smith; Editing by Andrea Ricci)

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Economy

Canadian dollar rebounds from one-week low ahead of jobs data

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Canadian dollar

By Fergal Smith

TORONTO (Reuters) -The Canadian dollar strengthened against its U.S. counterpart on Thursday, recovering from a one-week low the day before, as the level of oil prices bolstered the medium-term outlook for the currency and ahead of domestic jobs data on Friday.

The Canadian dollar was trading 0.4% higher at 1.2560 to the greenback, or 79.62 U.S. cents. On Wednesday, it touched its weakest intraday level since March 31 at 1.2634.

“We have seen partial retracement from the decline over the last couple of days,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets.

“With oil prices where they are – let’s call WCS still at roughly $49 a barrel – I still think CAD has room to strengthen over the medium term and even over a one-week horizon.”

Western Canadian Select (WCS), the heavy blend of oil that Canada produces, trades at a discount to the U.S. benchmark. U.S. crude futures settled 0.3% lower at $59.60 a barrel, but were up nearly 80% since last November.

The S&P 500 closed at a record high as Treasury yields fell following softer-than-anticipated labor market data, while the U.S. dollar fell to a two-week low against a basket of major currencies.

Canada‘s employment report for March, due on Friday, could offer clues on the Bank of Canada‘s policy outlook. The central bank has become more upbeat about prospects for economic growth, while some strategists expect it to cut bond purchases at its next interest rate announcement on April 21.

On a more cautious note for the economy, Ontario, Canada‘s most populous province, initiated a four-week stay-at-home order as it battles a third wave of the COVID-19 pandemic.

Canadian government bond yields were lower across a flatter curve in sympathy with U.S. Treasuries. The 10-year fell 3.3 basis points to 1.469%.

(Reporting by Fergal Smith;Editing by Alison Williams and Jonathan Oatis)

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