CBR Quarterly Inflation Review - Q2 2008
Central bank: cbr | Type: quarterly_review | Date: 2008-06-30

THE CENTRAL BANK
OF THE RUSSIAN FEDERATION
(BANK OF RUSSIA)
Quarterly
Inflation
Review
2008 Q2
Research and Information Department
The electronic version of Quarterly Inflation Review is available on the Bank of Russia's website :
 .ru/publ/.
Quarterly Inflation Review currently issued by the Bank of Russia’s Research and Information Department
is a document primarily aimed at analysing the latest consumer price trends. Inflation surveys published
in countries implementing inflation targeting (inflation forecasts) offer projected inflation estimates to
study potential inflation deviation from the target, analyse the reasons for such deviation and outline
the central bank’s measures to steer inflation towards the target. Since the end of 2006 the Bank
of Russia, assisted by the IMF , carries out work to develop an analysis and forecast system similar to
those used by central banks implementing inflation targeting. As the methods of analysis and forecast
improve, quarterly inflation reviews will be expanded and complemented with respective sections.
Contents
Introduction..................................................................................................................3
Inflation.Dynamics.........................................................................................................4
Consumer prices ....................................................................................................................... 4
Housing prices .......................................................................................................................... 6
Producer prices ......................................................................................................................... 7
Foreign trade ............................................................................................................................ 9
Demand ................................................................................................................................. 11
Supply .................................................................................................................................... 14
Labour market ......................................................................................................................... 14
Monetary.Conditions...................................................................................................16
Exchange rate ......................................................................................................................... 16
Interest rates ........................................................................................................................... 18
Asset prices ............................................................................................................................ 21
Monetary aggregates ............................................................................................................... 22
Credit aggregates .................................................................................................................... 25
Statistical.Addendum..................................................................................................27
2008 Q2 3
Introduction
Rapid growth in consumer prices that began
in the Russian economy in the second half of 2007
continued in the first half of this year. Inflation in
January-June 2008 quickened to 8.7% as against
5.7% in the same period last year. The acceleration
of inflation in the country is largely due to the
increase in food prices, which account for a large
share of household consumer expenditures.
Growth in food prices on world commodity
markets has been another contributing factor.
Faster price growth has been registered virtually
in all major groups of goods and services included
in the consumer price index calculation showing
that there are fundamental factors behind the
acceleration of inflation, mostly related to the
expansion of domestic demand. This process is
the result of the easing of monetary and budget
policies in the past two years.
The Bank of Russia has been taking measures
to tighten monetary conditions for the economy.
It continued to raise interest rates to contain
inflation and make money supply grow slower. In
April and June 2008, the refinance rate and the
Bank of Russia interest rates were raised by a total
of 0.5 percentage points. Another rise in interest
rates took place in July. As a result, in the first
seven months of this year, interest rates rose by
one percentage point. The raising of the required
reserve ratios for credit institutions’ obligations
on July 1 and September 1 may also contribute to
the slowing of growth in money supply.
On May 14, 2008, the Bank of Russia changed
the procedure for conducting interventions on
the domestic foreign exchange market, which
is expected to result in higher volatility of ruble
rate with its fluctuations less predictable, and
help reduce the inflow of short-term speculative
capital and slow growth in the money supply. In
addition, this move may gradually enhance the
effect of the interest rate policy on economic
development.
The average quarterly MIACR on overnight
ruble loans was slightly higher in the second
quarter 2008 than in the previous quarter. Bank
deposit and lending rates also increased a little
in that period. On the one hand, their rise was
due to the increased uncertainty on the financial
markets and growth in risks and inflationary
expectations; on the other hand, it was a reaction
to the monetary policy tightening.
The second quarter of the year saw the
beginning of a tendency towards the shrinking
of the money gap. The annualised money supply
growth approached the current estimates of the
money demand dynamics. However, the positive
money gaps impact on inflation, first registered in
the middle of last year, will persist in the medium
term.
4 2008 Q2
Inflation Dynamics
Consumer prices
The accelerated growth in the prices of
consumer goods and services, which began in
the second half of 2007, continued in the first
half of this year. According to the Federal State
Statistics Service (Rosstat), inflation stood at
8.7% in January-June 2008 as against 5.7% in
the same period of 2007. Prices went up 15.1%
in June 2008 and 13.9% in the first half of 2008,
year on year.
Core inflation stood at 6.7% in the first
half of this year as against 3.0% in the first half
of 2007 and an estimated 15.1% in June 2008 as
compared with June 2007.
Growth in the prices of goods and services
included in the core consumer price index
calculation accounted for an estimated 5.3
percentage points, or 60.5%, of overall consumer
price growth in the first half of 2008 as against
2.3 percentage points, or 40.4%, in the same
period of 2007. The acceleration of core inflation
was largely due to the increased growth in food
prices, excluding vegetable and fruit prices, which
began in the second half of 2007.
Food prices, excluding vegetable and fruit
prices, gained 8.7% in the first half of this year
as against 2.7% in January-June 2007. Increase
in the prices of these products accounted for an
estimated 3.1 percentage points, or 35.2%, of
overall consumer price growth in the first half
of the year as against 1.0 percentage point, or
17.6%, in the first half 2007.
Consumer price inflation (%)
Growth (June 2008
on December 2007)
Growth (June 2007
on December 2006)
Prices of goods and services, total: 8.7 5.7 Acceleration of growth by 3.0 percentage points
of which:
– food prices 11.4 6.1 Acceleration of growth by 5.3 percentage points
– food prices, excluding vegetable and fruit prices 8.7 2.7 Acceleration of growth by 6.0 percentage points
– non-food prices 4.4 2.2 Acceleration of growth by 2.2 percentage points
– prices of paid services provided to households 10.8 9.8 Acceleration of growth by 1.0 percentage points
Prices of goods and services included in core inflation calculation 6.7 3.0 Acceleration of growth by 3.7 percentage points
Source: Rosstat.
Inflation Dynamics
2008 Q2 5
Growth in the prices of most basic food
products in January-June 2008 far surpassed the
corresponding price increase in the same period a
year earlier. In particular, prices of bread and bakery
products jumped 20.7% in the first six months of
this year as against 4.7% in the same period last
year, pasta 26.0% as against 2.9%, meat and
poultry 7.8% as against 2.3% and sunflower oil
25.9% as against 0.8%. The accelerated rise in
food prices on the consumer market was partly
due to faster growth in agricultural producer
prices. In particular, grain producer prices went up
20.2% in the first half of this year as against 8.0%
in the same period last year, sunflower producer
prices rose 16.7% as against 8.1% in January-
June 2007, and livestock and poultry producer
prices gained 3.9%, whereas in the first half of
2007 they fell 1.1%.
In January-June 2008 the Russian
government continued grain interventions on the
domestic market, first launched in October 2007
to contain growth in the prices of grain products.
In addition, it kept high until July 1, 2008, the
export duties on some cereals. The agreements
between major trading networks to freeze the
prices of some socially important food products
remained in effect until May. As a result, growth in
food prices, excluding vegetable and fruit prices,
slowed by 3.1 percentage points in January-June
2008 as compared to the second half of 2007.
The world grain market demonstrated differ-
ent price dynamics in January-June 2008. Com -
pared to December 2007, the price of Thai rice
grew 110%, US maize 59.2% and Canadian bar -
ley 21.2%, while US and Canadian wheat prices
were down 5.4% and 8.2%, respectively.
World meat and vegetable fat prices also
continued to rise. Beef prices went up 35.5% in
January-June, while the price of sunflower oil on
the European market increased 39.2%.
Vegetable and fruit prices rose 36.0%
in the first half of this year, a slowdown by 2.6
percentage points on the same period last year.
Growth in vegetable and fruit prices in the first
half of 2008 accounted for an estimated 1.4 per-
centage points of headline inflation, or 15.7% of
overall consumer price growth (compare with
an estimated 1.5 percentage points and 26.0%,
respectively in the same period a year earlier).
In January-June 2008 growth in vegetable and
fruit prices was smaller than their average annual
growth in the previous three years.
Food prices gained 11.4% in the first half of
this year as against 6.1% in the same period last
year.
Growth in non-food prices accelerated to
reach 4.4% in the first half of this year as against
2.2% in January-June 2007. The biggest increases
were registered in the price of car petrol (16.1%
as against 0.5% in the first half of 2007), washing
liquids and detergents (7.8% as against 3.2% in
the same period of 2007) and building materials
(6.8% as against 6.5% in January-June 2007).
According to estimates, the increase in non-food
prices accounted for 1.6 percentage points, or
18.2%, of overall consumer price growth in the
Food price inflation (%)
Growth (June 2008
on December 2007)
Growth (June 2007
on December 2006)
Food products 11.4 6.1 Acceleration of growth by 5.3 percentage points
Bread and bakery products 20.7 4.7 Acceleration of growth by 16.0 percentage points
Cereals and legumes 20.4 7.2 Acceleration of growth by 13.2 percentage points
Pasta 26.0 2.9 Acceleration of growth by 23.1 percentage points
Meat and poultry 7.8 2.3 Acceleration of growth by 5.5 percentage points
Fish and seafood 3.9 4.3 Slowing of growth by 0.4 percentage points
Milk and dairy products 6.1 2.2 Acceleration of growth by 3.9 percentage points
Butter 5.6 2.7 Acceleration of growth by 2.9 percentage points
Sunflower oil 25.9 0.8 Acceleration of growth by 25.1 percentage points
Granulated sugar 17.5 -4.5
Vegetables and fruit 20.6 11.2 Acceleration of growth by 9.4 percentage points
Alcoholic beverages 6.0 3.4 Slowing of growth by 2.6 percentage points
Source: Rosstat.
6 2008 Q2
first half of 2008 as compared with an estimated
0.8 percentage points, or 13.7%, in January-June
2007.
The acceleration of price growth on the
non-food market, which is characterised
by highly diversified consumer demand and
high competition, including competition with
importers, is a sign of rapid growth in demand.
In the first half of the year the Bank of Russia
repeatedly raised its interest rates to contain the
expansion of aggregate demand.
Prices of paid services provided to
households increased 10.8% in January-June
2008 as against 9.8% in the same period last year
and accounted for an estimated 2.7 percentage
points, or 30.8%, of overall consumer price
growth (2.4 percentage points, or 42.7% of
headline inflation in the first half of 2007).
Regulated prices of paid services grew by an
estimated 12.0% in January-June 2008 or 0.2
percentage points faster than in the same period
last year.
Rent and communal service charges
increased 14.6% as against 12.7% in the first half
of last year, and passenger transport fares grew
17.0% as against 11.9% in January-June 2007.
Growth in service prices in the first half of
2008 exceeded overall growth in the prices of
goods by 2.8 percentage points as against 5.5
percentage points in January-June 2007.
According to Rosstat, consumer price growth
in all federal districts in the first half of 2008 was
higher than in the same period last year.
Estimates show that the differences between
various Russian regions and territories in terms of
the cost of a fixed set of goods and services used
by Rosstat for the interregional comparisons of
the purchasing power of the population became
less pronounced in the first half of 2008. The
regional difference ratio1 in that period decreased
to 38.2% from 41.1% in the same period last
year.
In the first half of 2008, the rates of growth in
food prices, excluding vegetable and fruit prices,
differed slightly by federal district (from 7.5% to
10.7%). Growth in non-food prices in that period
was almost twice as slow and differed by federal
district from 4.4% to 5.1%. As for the vegetable
and fruit prices, their growth rates differed more
significantly by federal district. In the Central
Federal District, for example, vegetable and fruit
prices rose 40.3% in January-June, whereas in
the Far Eastern Federal District they increased
27.8%.
Growth in service prices accelerated in
all federal districts in the first half of 2008 as
compared with the same period last year.
Housing prices
Housing prices increased 7.7% on the
primary market and 11.9% on the secondary
market in June 2008 as compared with December
2007. Compared with the first half of 2007,
growth in housing prices on the primary market
slowed by 3.0 percentage points, whereas on the
secondary market price growth accelerated by 1.2
percentage points.
There was a marked slowing of growth
in housing construction in the first half of this
year. While in the first half of last year housing
construction increased 34.3%, in the same period
of 2008 there was a growth of 2.9%. Together
with the slowing of housing price growth on the
primary market, that may testify to the saturation
of demand in this segment of the real estate
market. It should be noted that this demand is
1 The regional difference ratio is calculated by the Bank of
Russia as the difference between the cost of a fixed set of
goods and services in the most and least expensive regions
relative to the national average cost of the set.
Inflation Dynamics
2008 Q2 7
partly created by investors and therefore the
slowing of price growth may be the result of the
world financial crisis.
Producer prices
Industrial producer prices increased 17.0%
in the first half of this year as against 14.6% in
the same period of 2007. The acceleration of
producer price growth was mostly due to the
price rise in the manufacturing sector and in the
production and distribution of electricity, gas and
water. Producer prices also rose significantly in
the mining sector, especially in the production of
fuel and energy.
Producer price growth in the manufacturing
sector stood at 16.2% in the first half of this year
as against 8.3% in the first half of 2007. The most
significant price growth was registered in the
metallurgy sector (28.8% as against 14.1% in the
first half of 2007), chemical industry (26.1% as
against 3.7%) and output of petroleum products
(19.1% as against 11.5%).
Price growth acceleration was registered in
all manufacturing industries turning out products
for the consumer goods market in the first half of
2008, as compared with the same period of 2007.
For instance, producer prices in the production of
food, including beverages, and tobacco gained
10.8% as against 3.7% in January-June 2007, and
there was a similar movement in producer prices in
the textile and clothing industry (6.6% as against
4.7%) and in the production of leather, leather
goods and footwear (3.2% as against 2.9%).
Price growth in the production, transmission
and distribution of electricity accelerated to 17.3%
in the first half of this year as against 15.1% in the
same period last year.
Producer price growth in the mining sector
slowed to 18.3% in January-June 2008 as against
32.9% in the same period last year. Producer price
growth was slightly higher in the fuel and energy
sector (19.2% as against 37.0% in the first half of
2007). Price growth in the mining sector, except
the fuel and energy sector, accelerated to 9.1% in
8 2008 Q2
January-June 2008 as against 3.6% in the same
period last year.
The contribution from producer prices in the
mining sector to overall industrial producer price
growth equalled an estimated 4.9 percentage
points, or 28.8%, in the first half of 2008, as
compared with an estimated 7.4 percentage
points, or 50.5%, in January-June 2007.
Freight charges increased 11.7% in the first
half of this year as against 10.6% in the same
period last year. Railway transport fares rose
12.7% as against 7.7% in January-June 2007.
Communication fees for corporate
entities gained 10.2% in the first six months of
this year as against 3.8% in the same period of
2007.
Producer prices of building materials
increased 7.3% in January-June 2008 as against
6.8% i8n the corresponding period a year
earlier.
Agricultural producer prices grew 4.3%
in January-June 2008, whereas in the same
period last year they went down by 0.6%. Crop
grower prices made the biggest contribution to
agricultural producer price growth. In the first
six months of this year crop grower prices rose
17.2% as against 3.9% in the same period last
year. Especially high growth was registered in
potato producer prices (38.0% as against 19.8%
a year earlier).
Livestock breeder prices were down 4.7% in
January-June 2008, whereas in the same period
last year they dropped 3.6%.
Inflation in some countries of the
world2
Inflation in the countries that are the major
exporters of goods to Russia accelerated to 4.2%
in the first half of 2008 (June on December
of the previous year) from 2.1% in the same
period last year . Price growth quickened in most
of the countries that account for a large portion
of Russian imports. The biggest contribution to
aggregate inflation was made by the acceleration
of price growth in Ukraine (to 15.5% from 4.2%
in the first half of 2007), with growth in energy
and food prices remaining the key factor of
accelerated inflation.
In the United States, consumer prices
increased by 4.2% in the first half of the year
(June 2008 on December of the previous year) as
against 3.2% in June 2007 due to significant rise
in energy prices, while the contribution from core
inflation and food price growth to overall price
growth remained unchanged from the first half
of 2007. In the euro area, inflation accelerated
2 Based on data provided by the Bureau of Labor Statistics
at the US Department of Labor, the Statistical Office of the
European Communities (EUROSTAT) and national statistical
offices of other countries. Contribution from individual fac -
tors to US and eurozone inflation has been evaluated by the
Bank of Russia.
Inflation Dynamics
2008 Q2 9
to 2.3% (June on December of the previous year)
as against 1.4% in the same period of 2007, as
the contribution from energy and food prices
increased and that from core inflation waned.
Foreign trade
The price situation for major Russian export
commodities3 on world markets in January-June
2008 was favourable. World market prices of
Russian exports were higher than in the same
period last year, especially energy prices that
grew 66.8%, while non-energy prices climbed
16.1% on average.
Global oil prices grew faster this year,
especially in the second quarter, hitting all-time
record high. On June 27, the price of Urals crude
jumped to a six-month high of $ 134.1 per barrel.
There have been a marked rise in Russian oil
prices since December 2007 (by 43.1% in June
2008 as against 16.6% in June 2007), reflecting
the impact of such factors as the state of oil and
petroleum products stocks in the United States
and other OECD countries, US dollar dynamics
as against other major world currencies,
significant investments in raw materials markets,
the exacerbation of the geopolitical situation
in the world in connection with Iran’s nuclear
programme, instability of oil deliveries from
Nigeria and weather conditions. As a result, the
average price of Urals crude increased 78.5% in
2008 Q2 year on year to nearly $ 117 per barrel,
according to Bank of Russia estimates.
The world market price of Russian oil
increased 76.3% in the first half of 2008 year
on year to $ 105.3 per barrel. Prices of petroleum
products gained 76.1% on average. Of these,
the price of diesel fuel soared 81.1% and fuel oil
74.6%, while premium and straight-run petrol
prices went up 44.7% and 49.6%, respectively.
The price of natural gas in Europe rose 40.9%.
3 Average prices have been calculated on the basis of data pro-
vided daily by the following news agencies and exchanges:
Reuters for oil, Petroleum Argus for petroleum products (pet-
rol, diesel fuel and fuel oil) and the London Metal Exchange
for non-ferrous metals (aluminium, copper and nickel). Data
on average monthly prices of natural gas and ferrous metal
price indices were provided by the World Bank, and on other
goods, by the International Monetary Fund.
A key factor behind the rise in ferrous metals
prices has been the impact of higher raw materials
prices on ferrous metals producers’ costs (for
instance, prices of iron ore soared almost 70%
in the first six months of 2008 year on year).
Growth in ferrous metal prices accelerated in the
second quarter of this year: compared with the
same period last year, they rose 56% on average
(first-quarter growth stood at 30%). Ferrous
metal prices increased 67.9% in June 2008 on
December 2007, as against 36.8% in June 2007.
In the first half of this year, ferrous metal prices
were 43% higher than in the first half of 2007.
On the non-ferrous metals market, copper
and aluminium prices kept on rising in the
second quarter of the year, while the price of
nickel continued to fall (nickel prices had been
falling for four consecutive quarters). Growth in
copper and aluminium prices of in January-June
2008 reflected mainly high demand in industry,
especially in China, the major consumer, as it
prepared to host the Olympic Games. The fall in
nickel prices was largely due to an unprecedentedly
high level of nickel stockpiles. Aluminium and
copper prices went up 25% in June 2008 on
December 2007, whereas nickel prices dropped
13.5%. Aluminium and copper prices grew 2.3%
and 19.5%, respectively, while the price of nickel
fell 38.7% in January-June 2008 year on year.
And there was a substantial rise in prices of other
Russian raw material exports, except wood and
10 2008 Q2
saw timber, as compared with January-June
2007.
World prices of major Russian food imports4
had different dynamics in the second quarter
of the year. Wheat and sugar prices declined,
growth in prices of barley, maize, sunflower oil
and butter slowed down while growth in meat
and rice prices accelerated.
The sharp rise in the world wheat prices from
May 2007 to March 2008 gave way to a price
downturn in April, as the area sown to wheat
4 Average sugar prices have been calculated on the basis of
data provided daily by the London Commodity Exchange,
other prices are the monthly averages published by the World
Bank and IMF .
expanded and a bumper harvest was expected.
Even though US wheat prices fell 16% in 2008 Q2
quarter on quarter, they remained at the highest
level in 40 years and were 70% higher than a year
earlier. Pushed up by demand, maize and barley
prices continued to rise: in the first quarter of the
year, the price of maize went up 17.5% and barley
10% year on year, and in the first half of the year,
maize and barley prices increased by 1.4-1.5 times
year on year. The second quarter of the year saw
the sharp acceleration of growth in rice prices,
which increased almost 80% quarter on quarter
(Q1 growth stood at 40%). The price upturn was
due to high demand and the ban imposed on
rice imports by some producing countries, such
as India and Thailand, to protect the domestic
market. As a result, the price of rice rose 110%
in the first half of this year as compared with
the same period last year (in the previous two
years the price of rice rose by an average of 7%
a year).
The increased energy and fodder prices and
the rise in world demand led to growth in the
prices of meat, milk, butter, cheese and other
dairy products. The acceleration of growth in
beef prices was also due to the rise in demand on
the dairy products market, the reduction of beef
production in the EU, the drop in beef imports
from Brazil caused by health safety problems
and the restrictions placed on beef exports by
Argentina. In the second quarter of the year, the
price of beef rose 17.9% quarter on quarter and
poultry was up 5.8% (as compared with price
Inflation Dynamics
2008 Q2 11
increases of 8.6% and 1.4%, respectively, in the
first quarter). In the first half of the year, beef
prices rose 18.0% as compared with the same
period last year and poultry gained 6.4%.
The shortage in milk and dairy products on the
world market in 2007 led to significant increase in
prices. In early 2008, all countries that supplied
these products to the world market restored
output to previous volumes, while South East
Asia, especially China, increased milk production,
causing prices to fall. Contract import prices of
milk declined 11% in May 2008 on December
2007. However, milk prices remain high on the
world market this year: in January-May 2008,
the average contract price of milk imported to
Russia rose 55% as against the same period last
year. Growth in the price of butter slowed to 3%
in the second quarter of this year, whereas in
the two preceding quarters it stood at 27-28%.
Growth in sunflower oil prices was due to the
fall in production in the two previous agricultural
years and the sharp drop in exports from Ukraine
and Argentina. In the second quarter of 2008,
growth in sunflower oil prices slowed down
(compared with the previous period, the price of
sunflower oil rose 8%, whereas in the previous
four quarters it increased by an average of 26%
a quarter). As a result, vegetable oil and butter
prices remained high: in the first half of this year,
the world market price of butter doubled and the
price of sunflower oil increased by 2.4 times, as
compared with the same period last year.
On the world sugar market, first-quarter
growth in prices gave way to a price decrease in
the second quarter. As a result, in the first half of
this year the price of raw sugar rose 11.3% and
refined sugar 4.6%, as compared with the same
period last year.
The price situation on world commodity
markets remained favourable for Russia’s trade
with other countries in the first half of the year
(and in 2008 Q2, in particular). The rise in the
terms of trade index5 accelerated as export prices
grew faster than import prices.
Accelerated growth in exports accounted
for Russia’s foreign trade surplus increase by
75.1% to $ 104.8 billion6 in the first half of 2008,
year on year. In the first half of 2007, Russia’s
foreign trade surplus contracted by 19.3% to
$ 59.9 billion.
Foreign trade in some countries7
As was expected, the terms of trade changed
for the better for the energy exporting countries
in the first half of 2008 due to continued growth
in the world prices of their major raw material
exports. In the first half of the year, the International
Energy Agency repeatedly scaled down its forecast
for growth in world oil consumption in 2008 but
raised it significantly in July as the forecast for
demand in Asia and the Middle East was scaled
up. The OECD predicts that the average annual
price of Brent crude will increase more than 50%
this year and exceed $ 110 per barrel.
Russia’s trading partners increased their
expenditures on the consumption of oil and
petroleum products. Russia supplies more than
a quarter of the EU’s aggregate demand for
imported mineral fuel.
Demand
Domestic demand
Russia’s GDP expanded by an estimated
7.8-8% in the first half of 2008 year on year
(in January-June 2007, it grew 7.8%). Domestic
5 The ratio between export and import price indices.
6 According to a balance of payments estimate as of July 4,
2008.
7 According to data provided by the International Energy
Agency , Organisation for Economic Cooperation and Devel-
opment, Statistical Office of the European Communities EU-
ROSTAT and OECD Economic Outlook No. 83, June 2008.
12 2008 Q2
demand demonstrated continued growth. The
positive influence of consumer demand on the
expansion of the output of goods and services
was limited by competitive imports. Imports
continued to make up a large portion of the
retail trade commodity resources, but in the first
quarter of this year, it was by 2 percentage points
smaller than in January-March 2007 and stood
at 46%. The share of food imports contracted
from 38% to 37%, while the share of non-food
imports decreased by 2.8 percentage points to
53.5%. Estimates show that domestic demand for
imports grew faster than demand for domestic
products.
Both investment and consumer goods
imports increased at rapid rates. According to the
Bank of Russia estimate, imports of investment
goods necessary for economic development
grew a little faster than consumer goods imports,
which increased largely due to rapid growth in the
import of cars, household appliances and other
non-food products.
Imports from non-CIS countries, especially
from China and other Asia-Pacific Economic
Cooperation (APEC) member countries, increased
more rapidly than overall imports in January-
June 2008. Imports from European Union (EU)
member countries also grew a little faster than
imports from other countries. Imports from CIS
countries grew slowly, whereas imports from
Georgia and Uzbekistan decreased.
In the first half of the year, imports of goods
increased mostly due to the expansion of import
volumes. However, growth in import volumes
slowed down in 2008 Q2 while import price
growth accelerated. The rise in import prices,
GDP consumption
(growth as % of corresponding period of previous year)
2007 2008
Q1 Q2 Q3 Q4 Full year Q1
GDP 7.4 8.1 7.3 9.5 8.1 8.5
Final consumption 10.4 10.6 10.5 11.0 10.6 10.6
Of which:
– households 12.4 12.7 12.8 13.1 12.8 14.1
Gross capital formation 24.9 25.9 18.1 23.6 22.6 10.4
Net exports -23.9 -29.2 -41 -20.4 -28.1 -7.3
– exports 3.8 5.3 4.4 11.3 6.4 14.4
– imports 28.4 28.9 26.4 26.1 27.3 27.3
Source: Rosstat.
especially the prices of imported foodstuffs
and edible raw materials, creates conditions for
price growth on the domestic market. As before,
growth in the cost of imports mainly results
from the acceleration of growth in engineering
imports.
Economic growth, financial stability of
enterprises and the increase in the government
social security benefits in the first half of the year
led to 8.1% growth in household real disposable
money income. The share of wages and salaries
in household money income contracted from
69.1% to 68.6% in January-June 2008, while
the share of social transfers and income from
entrepreneurial activities expanded. The structure
of household expenditures also changed slightly
in 2008: the share of consumer expenditures
expanded from 71.5% to 73.3%, compulsory
payments and duties from 12.6% to 12.9% and
foreign exchange purchases from 5.2% to 5.7%.
The share of organised savings contracted by
0.8 percentage points to 8.3%. These figures
show that as inflation accelerated and deposit
interest rates remained low, people preferred to
spend more on consumption rather than increase
organised savings. Expenditures on household
final consumption grew 14.1% in the first quarter
of 2008 as against 12.4% in January-March
2007.
Rapid growth in consumer expenditures
stimulated retail sales. Retail trade turnover
expanded 15.2% in January-June 2008, while
the value of paid services provided to the
public increased 6.0%. Transport, municipal
and communications services accounted for
Inflation Dynamics
2008 Q2 13
the largest part of the paid services in terms of
value.
Government expenditures on final
consumption increased 2.3% in the first quarter
of this year as against 5.6% in the same period
of last year. According to the Federal Treasury’s
preliminary data, federal budget expenditures
rose to 15.9% of GDP in the first half of 2008 as
against 15.0% in January-June 2007. Non-interest
expenditures hit a four-year record high of 15.5%
of GDP (as against 14.5% in January-June 2007).
This growth in non-interest expenditures was
chiefly due to the increase in social expenditures
and partial transfer of obligations from 2007 to
2008. Larger expenditures in the first half of the
year were also attributable measures taken by the
Finance Ministry to level out cash expenditures
more evenly during the year. The federal budget
execution in terms of non-interest expenditures
in January-June 2008 was 40.4% of the level
written down in the 2008 federal budget law
as amended, which represents a considerable
improvement on the previous year’s 33.0%.
The funds on the government’s accounts
with the Bank of Russia continued to grow
significantly in the first half of the year, absorbing
surplus liquidity in the economy. At the same
time, the federal budget surplus contracted by
0.1 percentage points in January-June 2008 as
compared with the same period last year and
stood at 7.3% of GDP.
Gross capital formation increased 10.4%
in January-March 2008 as against 24.9% in the
same period last year. Growth in investment
activity slowed down. Fixed capital investment
increased 16.9% as against 23.7% in January-
June 2007. The largest sums were invested in the
mining sector, transport and communications.
Investments in machinery, equipment and
transport vehicles accounted for more than a third
of total investments. About one-fifth thereof
were used to acquire imported equipment.
Imports of machinery, equipment and transport
vehicles increased 63.5% in the first quarter of
this year as against 69.2% in the same period
last year. Imports of machinery and equipment
help modernise production and introduce
technological innovations and, consequently,
raise labour productivity, control price growth
in the economy, and create conditions for
sustainable economic growth.
Fixed capital investment was largely financed
(by 53.8%) by raising funds in January-March
2008. The share of bank loans in investment
financing stood at 10.4% (as against 9.2% in
January-March 2007).
As imports grew considerably faster than
exports, net exports of goods and services
decreased 7.3% in January-March 2008.
Thus, investment activity and the expansion
of consumer demand stimulated rapid economic
growth As a result, production exceeded its natural
14 2008 Q2
(potential) level, accelerating price growth on the
consumer goods market.
Foreign demand8
According to preliminary data, US GDP
increased 2.2% and China’s GDP expanded
10.4% in the first half of 2008 as against 1.5%,
respectively , in the first half of 2007. In the euro
area, GDP grew by an estimated 1.8% as against
2.9% in the same period last year . GDP growth in
the countries that account for a substantial part of
Russian exports slowed to an estimated 3.9% in
the first six months as against 5% in January-June
2007, a decline that corresponds to the predicted
level. By the end of the year, it is expected
to decline to 3.5% as against 4.7% in 2007.
Forecasts for annual GDP dynamics in the United
States and China have improved. According to the
IMF forecast, growth in the world production of
goods and services will slow to 4.1% in 2008 as
against 4.9% in 2007.
Russian exports9 of goods increased 54.4% to
$ 240.0 billion in January-June 2008 year on year.
Exports of goods to EU countries, especially Italy,
Germany and France, and CIS member countries,
particularly Belorussia and Ukraine, increased
faster than overall commodity exports.10
The value of Russian exports of goods
increased in January-June 2008 year on year,
largely due to higher energy export prices
accompanied by the expansion of natural gas
export volumes. Oil export volumes contracted
in the first half of the year. Export volumes grew
more slowly than export prices. According to
data on GDP consumption, exports of goods and
services increased 14.4% in 2008 Q1 as against
3.8% in January-March 2007.
Supply
Production grew in most of the economic
activity categories in the first half of this year.
The manufacturing sector, construction, trade,
education and healthcare increased their
8 According to data compiled by the Bureau of Economic
Analysis at the US Department of Commerce, the Statistical
Office of the European Communities (EUROSTAT), China’s
National Bureau of Statistics and national statistical offices of
other countries.
9 According to a balance of payments estimate as of July 4,
2008.
10 According to data provided by the Federal Customs Service
of Russia.
contribution to value added growth in 2008 Q1 as
compared with the same period last year, whereas
the mining sector’s contribution decreased. This
process may indicate that the Russian economy
has become slightly less dependent on the foreign
trade situation and that the role of the services
sector has increased.
Output in the key economic activity categories
increased 8.2% in the first half of this year as
against 8.1% in the same period last year. The
most rapid growth was registered in construction
and retail trade. In January-June 2008, retail trade
turnover expanded 15.2% (15.3% in January-June
2007), growth in construction stood at 22.4%
(19.9%) and freight transport turnover increased
4% (2.9%).
Industrial output grew 5.8% in January-June
2008 as against 7.1% in the same period last year.
The year-on-year deceleration of production
growth in January-June 2008 was largely due to
the slowing of growth in output in manufacturing
industries (from 11.4% in the first half of 2007 to
8.4% in the first half of this year) and also in the
mining sector (from 3% to 0.5%).
Agricultural production increased 4.3% in
the first half of this year as against 4% in the
same period last year. There was a rise in the
output of major livestock products, such as cattle
and poultry, which increased 8.5%, and milk,
which grew 1.3%. As a result, the output of meat
and meat products increased 7.7% in January-
June 2008 year on year (of which, the output
of meat and premium-quality by-products grew
14.1%). However, growth in agricultural producer
prices has accelerated.
Labour market
The number of people employed in the
economy continued to grow in January-June
2008, but the rate of growth slowed to 0.1%
from 2.6% in the same period of 2007.
Labour productivity increased by an estimated
7.9% in the first quarter of the year (as against
5.1% in the same period of 2007), containing
price growth in the economy. According to
estimates, labour productivity in the production
of goods grew faster than in the services sector
in 2008 Q1. Growth in the production of services
exceeded growth in the manufacturing sector. The
number of people employed in the services sector
Inflation Dynamics
2008 Q2 15
increased as compared with the same period last
year, while jobs numbers in the manufacturing
sector declined.
In the first half of this year, as in the previous
years, growth in real wage (by 13%) exceeded
growth in labour productivity. However, the
gap between growth in real wage and growth in
labour productivity narrowed as compared with
the same period last year.
The share of wages and salaries in the GDP
structure by source of income contracted from
49.5% in the first quarter of 2007 to 49.1% in
the same period this year.
Significant differences remained in wages
and salaries in different activity categories in
2008. The highest average monthly wage in
January-May 2008 was registered in the financial
sector (40,194 rubles) and fuel and energy
production (35,629 rubles). That exceeded the
national average by 2.5 times and 2.2 times,
respectively. The lowest wages were registered in
agriculture, hunting and forestry (7,099 rubles),
the textile and clothing industry (7,632 rubles)
and the production of leather, leather goods
and footwear (8,772 rubles). This accounts for
44.7%, 48.1% and 55.2% of the national average
wage, respectively. Wages and salaries were
lower than the national average in the activity
categories financed, to a large extent, from the
federal budget (education, communal, social and
personal services and healthcare).
The number of unemployed (calculated
according to the ILO methodology) rose 2.1%
in January-June 2008. The total number of
jobless accounted for an estimated 6.7% of the
economically active population (as against 6.5%
in the first half of 2007).
16 2008 Q2
Monetary Conditions
Exchange rate
The current account surplus stood at $ 31.7 in
the second quarter of the year, according to the
balance of payments estimate. This represents a
decrease from $ 37.7 billion in the first quarter of
2007. At the same time, preliminary data indicate
that the private sector registered a net capital
inflow of $ 35.7 billion in the second quarter of
the year. The Bank of Russia remained the net
buyer of foreign exchange on the domestic
foreign exchange market and as a result, Russia’s
international reserves increased by $ 56.5 billion
in the second quarter to $ 568.3 billion as of July
1, 2008.
The composition of the bi-currency basket
remained unchanged from the first quarter of
2008 (0.45 euros and 0.55 US dollars). On May
14, the Bank of Russia began to conduct regular
interventions on the domestic foreign exchange
market in addition to operations cushioning
intraday fluctuations of the bi-currency basket’s
ruble value. The decisions on the nature and scale
of the scheduled interventions are made taking
into account fundamental factors determined
by current dynamics of the key macroeconomic
indicators and monetary and budget policies.
Regular interventions allow for a broader range
of ruble fluctuations as against the bi-currency
basket within the limits of the target band and
signify the Bank of Russia’s transition to a more
flexible exchange rate policy.
The nominal ruble / dollar rate gained
more in the second quarter than in the first quarter
of 2008 (2.7% as against 1.6%). In the second
quarter, the dollar / ruble rate and dollar / euro
rate had similar dynamics characterised by high
volatility. Among the factors that gave a strong
boost to the dollar in the quarter under review were
data on growth in production and decline in first-
time jobless claims in the United States, released
in April, as well as ECB representatives’ comment
on the negative effect of sharp exchange rate
fluctuations causing market participants to fix
their profits whenever the dollar began to show
signs of weakening. Federal Reserve Chairman
Ben Bernanke’s statements predicting further
slowdown in the US economy also made for the
dollar’s depreciation at the beginning of 2008 Q2.
In this connection, the fact that the US currency
lost some of its attractiveness to investors amid
expectations of a new cut in the Federal Reserve
key interest rate played a significant role. The
weakening of the dollar in some periods was also
caused by the statistics on decline in US business
activity, published in April and May, and growth
in oil prices at the end of June.
The nominal effective ruble / euro rate
shed 1.7% in the second quarter as compared
with the first quarter of 2008 (it was down 1.6%
in the previous quarter). The nominal rate of
the ruble as against the bi-currency basket
gained 0.2% due to a more significant rally of the
ruble as against the dollar (it fell 0 / 2% in the first
quarter).
The nominal effective exchange rate of
the ruble as against foreign currencies lost 0.4%
in the quarter under review (in the first quarter of
the year it was down 0.8%). The real effective
rate of the ruble gained 1.5% as against 1.7% in
the first quarter. In April-June, the real effective
rate of the ruble continued to appreciate faster
than the nominal effective rate without marked
acceleration of inflation in Russia as compared
with its leading trading partners.
Monetary Conditions
2008 Q2 17
The real ruble / dollar rate gained 4.4% in
the second quarter as against 5.1% in the first.
As consumer price growth slowed down in Russia
in April-June, the relative contribution made by
domestic inflation to real ruble / dollar exchange
rate dynamics decreased in the second quarter,
while the contribution of the nominal ruble / dollar
rate and US inflation increased.
The real ruble / euro rate gained 0.8%
in the second quarter 2008 as against 2.1% in
the first quarter. In the period under review,
the contribution of the ruble / euro nominal
rate index and inflation in the euro area to real
ruble-euro exchange rate dynamics increased
significantly, while the relative contribution of
domestic inflation decreased. This tendency,
noted throughout the second quarter, was
largely a result of non-concurrent seasonal price
fluctuations in Russia and other countries.
The dollar / ruble and euro / ruble exchange
rate dynamics caused inflation in Russia to slow
down by an estimated 0.03-0.05 percentage
points over 2008 Q2.
The international currency market saw the US dollar
lose some of its value as against the currencies of most of
Russia’s trading partners in the first half of 2008. The dollar
became particularly depreciated as against the Slovak and
Czech koruna, Polish zloty and Hungarian forint. Compared
to December 2007, in June 2008 the dollar lost about 7%
as against the euro and about 5% as against the yuan. As
China broadened the range of the yuan’s intraday fluctuations
against the US dollar in the middle of 2007, the yuan rallied
far more rapidly in the first half of 2008 than in the first half
of 2007. In May 2008, the National Bank of Ukraine revalued
the hryvnia as against the US dollar to 4.85 from 5.05 hryvnia
to the dollar, the rate it had maintained since May 2005. The
National Bank of the Republic of Belarus made stability of the
exchange rate of the Belorussian ruble as against the US dollar
the target of its exchange rate policy for 2008.
18 2008 Q2
Interest rates
Money market and Bank of Russia interest
rates
As inflationary pressure on the Russian
economy increased, the Bank of Russia in the
second quarter of the year raised twice the
refinance rate and the rates on its operations (by
0.5 percentage point) (see Statistical addendum,
Table 9). The overnight credit rate, which sets
the upper limit of the Bank of Russia interest
rate band, was raised to 10.5% p. a. on April 29,
and on June 10 it was increased to 10.75% p. a.
The interest rate on standard ‘tom-next’ deposit
operations, which sets the lower limit of the
band, was raised to 3.25% p. a. on April 29, and
to 3.5% p. a. on June 10. Interest rates that set
the limits of the Bank of Russia interest rate band
were raised by 0.25 percentage point in the first
quarter of the year.
The monetary authorities of the leading industrialised nations in the first half of this year continued to pursue a policy
largely aimed at maintaining financial sector stability and controlling the risks created by the subprime mortgage crisis. The
US Federal Reserve in the period from January to April cut the
benchmark federal funds rate from 4.25% to 2% p. a. The
Bank of England in the same period lowered the refinance rate
from 5.5% to 5% p. a. The European Central Bank (ECB) in
the first half of the year maintained the refinance rate at 4%
p. a. as inflation risk increased in the euro area. By the middle
of the year the task of containing inflation had become the
most important factor of the central bank monetary policy.
From May 2008 the Federal Reserve and the Bank of
England kept the key interest rates intact (the ECB raised the
refinance rate to 4.25% in July). Interest rates were raised
in the first half of the year in Sweden, Norway , Poland,
Hungary , the Czech Republic, India and Indonesia. The central
banks of Turkey and the Philippines cut interest rates at the
beginning of the year, but in the second quarter they started
to raise them. LIBOR on the dollar-denominated deposits
with maturity periods from 1 month to 1 year fell by 1-2.5
percentage points in the first half of the year (June as against
December 2007), while LIBOR on the euro-denominated
deposits changed slightly. LIBOR on the dollar-denominated
deposits were lower than on the euro-denominated deposits
with the same terms.1
1 Source: Reuters.
Monetary Conditions
2008 Q2 19
The minimum overnight repo auction
interest rates were set at 6.5% p. a. on April 29,
and 6.75% p. a. on June 10.
Bank of Russia average daily debt on
instruments used to absorb banking sector surplus
liquidity stood at 244.1 billion rubles in the second
quarter of the year as against 333.9 billion rubles
in the first quarter. At the same time, average
banking sector debt to the Bank of Russia on
instruments used to provide liquidity decreased
quarter on quarter. In April-June 2008, it stood
at 52.1 billion rubles as against 65.6 billion rubles
in the previous quarter. As a result, the MIACR on
overnight ruble loans approached the lower limit
of the Bank of Russia interest rate band for most
of the second quarter, except the VAT payment
period.
Interest rates on the ruble-denominated
interbank loans rose moderately in the second
quarter of the year following the raise in Bank
of Russia rates. The average quarterly MIACR
on overnight ruble loans edged up to 3.9% p.
a. in the second quarter from 3.8% p. a. in the
first quarter of 2008. The slight increase in the
average level of interest rates was accompanied
by the narrowing of the range of interest rate
fluctuations. In the second quarter the overnight
ruble MIACR varied between 2.9% p. a. and 7.6%
p. a., whereas in the first quarter it fluctuated
from 1.5% p. a. to 6.7% p. a. Banks’ adaptation
20 2008 Q2
to the changed situation and partially restored
availability of external funding by the end of
the quarter accounted for the narrowing of the
interest rate band.
Most of the Russian money market
participants expected interest rates to rise in the
second quarter, and the increased inclination
of the interbank credit yield curve, caused by
accelerated growth in longer-term interest rates,
bears this out. Interest rates on interbank ruble
loans placed by Russian banks for 2-7 days rose
from 4.0% p. a. in the first quarter to 4.1% p. a. in
2008 Q2; interest rates on loans placed for 8-30
days increased from 6.0% to 6.6% p. a.; interest
rates on 1- to 3-month loans went up from 7.0%
to 8.0%. p. a.
Interest rates on household deposits
continued to rise in the second quarter as
competition on the deposit market intensified,
Bank of Russia raised its interest rates, inflation
accelerated and inflationary expectations
increased. The average rate on short-term
household ruble deposits in the second quarter
increased by 0.2 percentage points as compared
with the first quarter and stood at 7.1% p. a.
The average rate on long-term household ruble
deposits rose by 0.7 percentage points to 9.0%
p. a.
Monetary Conditions
2008 Q2 21
The increased cost of internal funding
for Russian banks, which still had limited
opportunities for raising funds abroad, led to
further growth in interest rates on loans to
non-financial enterprises . The average rate
on short-term loans to non-financial enterprises
in the second quarter rose by 0.3 percentage
points from the first quarter and reached 11.2%.
The average quarterly interest rate on long-term
loans increased by 0.4 percentage points in that
period and stood at 12.8%.
Interest rates grew the least on loans with
terms of up to 1 month (by less than 0.1 percentage
points) and the most on loans with terms of 6 to
12 months (by more than 0.7 percentage points).
As a result, the angle of slope of the yield curve
for loans to non-financial enterprises increased in
the second quarter and this may testify to higher
inflation expectations and higher interest rates in
the medium term.
There were different prices on the household
ruble credit market in the second quarter. The
average quarterly interest rate on long-term
loans rose by 0.3 percentage points from the
first quarter and reached 15.4% p. a., while the
average interest rate on short-term loans dropped
by 0.3 percentage points to 20.6% p. a. The fall
in short-term credit interest rates may be due to
the adjustment of these rates after their sharp
rise (by 1.2 percentage points) in the previous
quarter.
Asset prices
Yields on the federal loan bonds (OFZ)
market in the second quarter remained at the
March 2008 level. In April-June the OFZ effective
market portfolio indicator (MPI) changed within
a relatively narrow band (from 6.82% to 6.93%
p. a.). At the end of the second quarter, the MPI
stood at 6.87% p. a. as against 6.84% p. a. at the
end of the previous quarter. The average quarterly
effective MPI increased by 0.2 percentage points
to 6.9% p. a.
The OFZ yield curve continued to rise in the
second quarter. As the yield on the shortest-
term bonds declined moderately and the yield
on longer-term bonds rose, the angle of slope of
the yield curve increased. This may indicate that
market participants were expecting a rise in yield
on government bonds.
Russian stock market price dynamics were
different in the second quarter of the year. In April
and May Russian stock price rise significantly and
in the middle of May the RTS Index had reached
new historical highs. It should be noted that as
before, demand for Russian stocks in that period
was created by foreign portfolio investors, who
made short-term investments in the most liquid
instruments of Russian mining companies. In June,
the outflow of foreign capital from the domestic
stock market led to a major price correction.
The average second-quarter levels of the
major Russian stock indices, RTS and MICEX,
exceeded the previous month’s levels by 11.4%
and 6.0%, respectively. This growth was partly
22 2008 Q2
due to the low levels of these indices in the first
quarter.
Russian stock price dynamics in the second
quarter varied by sector and by issuer. There
was a rise in the prices or oil and gas company
shares and the shares of some metallurgy sector
companies, which increased due to price growth
in the world energy and metal markets, and
the shares of some credit institutions. At the
s time, the stock prices of major financial and
energy sector issuers, telecommunications and
communications, manufacturing, consumer
goods producing and retail trade companies fell.
Monetary aggregates
The slowdown in the annual growth in the
money supply continued in the second quarter
due to the dynamics of money demand and the
conditions of money supply.
Rapid economic growth notwithstanding,
growth in money demand this year may be
slower than in 2007 due to accelerated inflation,
the slowing of the de-dollarisation process and
slower growth in asset prices.
Marked reduction in the value of Bank of
Russia currency interventions amid the continued
accumulation of funds in government accounts
with the Bank of Russia, measures taken by
the Bank of Russia within the framework of its
currency and interest rate policy and reserve
requirements contributed to the continuation in
the second quarter of the tendency towards the
slowing of annual growth in money supply. As a
result, the annualised rate of growth in monetary
aggregate M2 declined from 42.2% as of April
1, to 31.2% as of July 1, 2008 (53.1% as of July
1, 2007). The most significant slowing of annual
growth in money supply was registered in April,
when ruble supply contracted in absolute terms.
The annual rate of growth in monetary ag-
gregate M1 declined significantly in the second
quarter of the year, from 35.2% as of April 1, to
21.9% as of July 1, 2008, which was considerably
lower than a year earlier (49.0%). At the same
time, the tendency towards the slowing of the
annual rates of growth in cash, which began in
2007 amid significant growth in the value of in -
dividuals’ payment for goods and services with
Monetary Conditions
2008 Q2 23
Money gap as an indicator of excess money supply in the economy
One of the monetary analysis objectives is to measure the excess (shortage) of money supply in the economy. For this
purpose analysts use such an indicator as the deviation of the current level of money supply from its equilibrium value, which
is known as money gap. One of the most common methods of determining the equilibrium value of money supply is the
evaluation of the money demand function.
The money demand function is the dependence between the value of the actual money supply and the factors deter -
mining the money demand in the economy1:
m – p = δ0 + δ1y + δ2w + δ3R – δ4π, where
m – p is the money supply in real terms;
y is the scaling variable that determines the transactional requirements of the economy (GDP or domestic demand in
real terms);
w is wealth (asset price index in real terms);
R is the vector of yields on financial assets in the national and foreign currencies (interest rates and the pace of ruble
appreciation);
π is the rate of inflation;
δ1 is the elasticity of money demand determined by the i factor .
Assuming that the elasticity of money demand by the scaling variable is equal to 1, the money demand equation may
be written down as the dependence of the rate of monetisation of the economy on the indicators described above.
m – p – y = δ0 + δ2w + δ3R – δ4π
monetisation
of the economy
The comparison of growth in the rate of monetisation of the economy and some of the factors that determine it is
shown in the chart.
The existence of a long-term relationship between the rate of monetisation and its determinants, which is confirmed by
econometric analysis, signifies that when this relationship is upset, one should expect such a change in the dynamics of the
indicators included in the money demand function that will eventually lead to the restoration of the equilibrium. Specifically ,
when the deviation from the long-term relationship results from growth in money supply , equilibrium (according to the con-
cept of the long-term neutrality of money) will be restored, with other things being equal, due to the rise in prices of goods
and services or assets. It is important, therefore, to evaluate such kind of deviation as an indicator of potential inflationary
pressure. In contemporary monetary analysis this indicator has come to be known as the money gap.
The money gap is the deviation of the current value of money supply from the equilibrium value, calculated on the basis
of the money demand function, using current2 values of the macroeconomic variables included in the long-term relationship.
The greater the deviation, the greater the inflationary pressure of the monetary factors.
1 Below is the logarithmic form of the money demand function.
2 The value of the scaling variable is represented by its potential level.
24 2008 Q2
bank cards, continued in the second quarter of
this year. In addition, the value of foreign cash
purchase by households, which increased in late
2007 and early 2008, could have some effect on
the slowing of growth in cash supply. As a result,
the annualised M0 growth slowed to 23.0% as of
July 1, 2008, from 35.6% as of July 1, 2007.
Demand deposit dynamics mainly reflected
the movement of funds on the accounts of non-
financial enterprises, which account for the larg-
est part of this aggregate. The annual rates of
growth in demand deposits fell sharply in the sec-
ond quarter: from 42.8% as of April 1, 2008, to
21% as of July 1, 2008 (62.4% as of July 1, 2007).
The most dramatic decline in the annual rate of
growth in demand deposits occurred in April as
the VAT payment procedure was changed earlier
this year1. In addition, this slowdown in the annu-
1 The VAT payment procedure was changed in 2008. Since
February VAT has become a quarterly rather than monthly
tax payable in the first month of the quarter following the
accounting quarter .
al rates of growth was partly due to rapid growth
in the value of demand deposits in the same pe -
riod last year.
The annual rates of growth in the total value
of ruble-denominated time deposits declined
in the second quarter of this year and stood at
46.0% as of July 1, 2008 (60.1% as of July 1,
2007). At the same time, they were higher than
the rates of growth in other monetary aggregates
owing to significant increase in time deposits of
non-financial enterprises (by 87.1% as of July 1,
2008).
The slowing of ruble time deposit growth
was a result of significant reduction in the rate of
growth in time deposits of households , which
began in 2007 and continued into the first half of
this year. The annual rates of growth in ruble-de-
nominated time deposits of households slowed to
31.4% as of July 1, 2008, from 39.9% as of April
1, 2008 and 48.4% as of July 1, 2007. The share
of household time deposits in monetary aggre -
gate M2 contracted from 28.9% as of January 1,
The dynamics of the money gap,3 calculated for the Russian economy for the period from 2001 to 2008, testifies to its
sustained growth from the middle of 2006. The accelerated growth in the money supply in 2009 and 2007 and the changed
dynamics of some indicators that determine the money demand created a significant positive money gap in the economy by
the beginning of 2008.
The money gap had been widening for 18 months and in the first half of 2008 it was on positive ground. This fact
serves to show that the risks of growth in the money supply persist, affecting medium- and long-term price stability. The
second quarter of the year saw a moderate tendency towards the narrowing of the money gap.
3 The following variables were used in calculating the money gap: domestic demand, the domestic demand deflator, the rate of ruble
appreciation against the bi-currency basket and the asset price index.
Monetary Conditions
2008 Q2 25
share of ruble deposits in household money
income increased the most from the second
half of 2005, that is, when the inflation slowed
down. This trend ended as soon as price growth
began to accelerate. Such bank deposit dynamics
may be not only a result of inflation but also
one of its causes. As price growth accelerates,
the accumulation of financial assets and,
consequently, money as a store of value become
less attractive and people begin to spend more on
consumption. This stimulates aggregate demand
and leads to further growth in consumer prices.
As it has already been noted above, the
annual growth in household foreign currency
deposits has accelerated significantly since the
middle of 2007 to more than 38% as of July 1,
2008, as against 3.5% on the same date of
previous year. In addition, household demand
for foreign exchange persisted and in the second
quarter of the year net sales of foreign cash to
individuals through exchange offices reached
nearly $ 4.1 billion, whereas in the same period
last year banks were buying foreign exchange
from individuals (net purchases amounted to
nearly $ 0.6 billion).
Credit aggregates
The cost of ruble borrowings continued to
rise in the second quarter of the year, affecting
to some extent the dynamics of loans 2 to various
categories of borrowers. Growth in credit to non-
financial enterprises stood at 8.5% in the second
quarter of this year as against 10.5% in the same
period last year. Growth in credit to households
continued to slow down: in the second quarter of
this year, it stood at 12.2% as against 14.4% in
the same period of 2007. This led to the slowing
of the annual rates of growth in total value of
loans in the second half of this year, which had
been accelerating for more than two years.
Nevertheless, the annual rate of growth in loan
debt remained high at 51.8% as of July 1, 2008
(50.1% as of July 1, 2007).
The slowing of growth in credit to non-
financial enterprises in the second quarter of the
year was accompanied by a slight fall in fixed
capital investment growth. One reason for the
2 Credit aggregates discussed here and below are denomi -
nated in the national and foreign currencies.
2007, to 28.4% as of July 1, 2008. The decline in
public propensity to save money by depositing it
with banks is also confirmed by the contraction
of the ratio of time deposits growth to household
income, which began in the latter half of 2007.
The contraction of the ratio of household time
deposits total value to household money income
was less pronounced due to expansion of the
share of foreign currency bank deposits, which
began in the second half of last year.
There were several reasons for the sustained
slowdown of growth in the value of household
time deposits. One of them was price growth,
which discouraged people from saving. The
26 2008 Q2
expansion of the share of loan debt in disposable
money income reflects this.
Housing loans continue to grow faster than
overall credit to households and the share of these
loans in total household loan debt is expanding.
slowing of growth in credit was the tightening of
lending conditions, including the increased cost
of borrowing.
Despite the slowdown, the rates of growth
in credit to households remain high and the
2008 Q2 27
Statistical Addendum
Table 1
Consumer prices by group of goods and services
(month on month, %)
Monthly
inflation
Core
inflation
Food price
growth
Food price
growth1
Vegetable
and fruit price
growth
Non-food
price growth
Growth in non-
food prices
excluding petrol
prices2
Service price
growth
January 2.4 0.8 2.0 1.0 11.3 0.4 0.5 6.2
February 1.7 1.2 3.0 1.9 12.6 0.5 0.5 1.0
March 0.8 0.7 1.2 0.9 3.2 0.4 0.4 0.7
April 0.4 0.4 0.3 0.3 -0.3 0.3 0.3 0.6
May 0.5 0.4 0.5 0.2 2.6 0.4 0.4 0.6
June 0.3 0.3 0.0 0.1 -0.6 0.3 0.3 0.7
July 0.7 0.5 0.9 0.7 2.7 0.4 0.3 0.6
August 0.2 0.6 -0.5 0.7 -10.0 0.8 0.5 0.8
September 0.1 0.8 -0.6 0.6 -11.0 0.8 0.6 0.5
October 0.3 0.5 0.0 0.4 -4.1 0.6 0.7 0.4
November 0.6 0.6 0.8 0.6 2.7 0.6 0.6 0.5
December 0.8 0.7 1.1 0.8 3.6 0.5 0.5 0.7
Full year (December on December) 9.0 7.8 8.7 8.5 10.3 6.0 5.7 13.9
January 1.7 0.6 0.9 0.6 4.1 0.4 0.4 4.7
February 1.1 0.5 0.8 0.5 3.6 0.3 0.4 2.6
March 0.6 0.5 0.8 0.5 3.2 0.4 0.4 0.6
April 0.6 0.5 0.8 0.5 3.1 0.4 0.4 0.5
May 0.6 0.3 1.0 0.1 7.8 0.4 0.3 0.5
June 1.0 0.4 1.7 0.4 12.2 0.3 0.3 0.6
July 0.9 0.9 1.4 1.4 1.9 0.4 0.4 0.6
August 0.1 1.1 -0.6 1.6 -16.1 0.6 0.5 0.5
September 0.8 1.6 1.0 2.2 -8.8 0.8 0.8 0.4
October 1.6 2.1 3.3 3.5 0.9 0.9 0.9 0.1
November 1.2 1.1 1.9 1.5 6.2 0.9 0.8 0.6
December 1.1 0.9 1.6 1.2 5.6 0.7 0.5 0.9
Full year (December on December) 11.9 11.0 15.6 14.9 22.2 6.5 6.4 13.3
January 2.3 1.1 1.9 1.2 8.3 0.6 0.6 5.4
February 1.2 1.0 1.7 1.3 5.1 0.6 0.6 1.4
March 1.2 1.1 2.0 1.5 5.9 0.7 0.7 0.6
April 1.4 1.3 2.2 1.8 5.5 0.9 0.7 1.0
May 1.4 1.1 2.1 1.5 6.4 0.8 0.6 1.0
June 1.0 0.9 1.1 1.2 0.4 0.7 0.5 1.1
1 Excluding vegetable and fruit prices.
2 Since March 2005 – Bank of Russia estimate.
Note: T ables 1 to 7 are based on Rosstat data and Bank of Russia calculations.
28 2008 Q2
Table 2
Consumer prices by group of goods and services
(since start of year on accrual basis, %)
Monthly
inflation
Core
inflation
Food price
growth
Food price
growth1
Vegetable
and fruit price
growth
Non-food
price growth
Growth in non-
food prices
excluding petrol
prices2
Service price
growth
January 2.4 0.8 2.0 1.0 11.3 0.4 0.5 6.2
February 4.1 2.0 5.0 2.9 25.3 0.9 0.9 7.2
March 5.0 2.8 6.2 3.9 29.3 1.3 1.3 8.0
April 5.4 3.2 6.5 4.2 28.9 1.6 1.6 8.6
May 5.9 3.6 7.0 4.4 32.3 2.0 2.0 9.3
June 6.2 3.9 7.0 4.5 31.5 2.3 2.3 10.0
July 6.9 4.5 8.0 5.2 35.0 2.7 2.7 10.7
August 7.1 5.1 7.4 6.0 21.6 3.5 3.2 11.5
September 7.2 5.9 6.7 6.6 8.2 4.3 3.8 12.0
October 7.5 6.5 6.7 7.0 3.7 5.0 4.5 12.5
November 8.2 7.1 7.5 7.6 6.5 5.5 5.2 13.0
December 9.0 7.8 8.7 8.5 10.3 6.0 5.7 13.9
January 1.7 0.6 0.9 0.6 4.1 0.4 0.4 4.7
February 2.8 1.1 1.8 1.1 7.8 0.7 0.8 7.4
March 3.4 1.7 2.6 1.7 11.2 1.1 1.2 8.0
April 4.0 2.2 3.3 2.1 14.7 1.5 1.7 8.6
May 4.7 2.5 4.3 2.3 23.6 1.9 2.0 9.1
June 5.7 3.0 6.1 2.7 38.6 2.2 2.3 9.8
July 6.6 3.9 7.6 4.1 41.2 2.6 2.8 10.5
August 6.7 5.0 7.0 5.8 18.5 3.2 3.3 11.1
September 7.5 6.7 8.1 8.1 8.1 4.0 4.2 11.6
October 9.3 8.9 11.6 11.9 9.0 4.9 5.1 11.7
November 10.6 10.1 13.7 13.5 15.7 5.8 5.9 12.4
December 11.9 11.0 15.6 14.9 22.2 6.5 6.4 13.3
January 2.3 1.1 1.9 1.2 8.3 0.6 0.6 5.4
February 3.5 2.1 3.6 2.5 13.9 1.2 1.2 6.8
March 4.8 3.2 5.7 4.0 20.6 2.0 1.9 7.5
April 6.3 4.5 8.0 5.9 27.2 2.9 2.6 8.5
May 7.7 5.7 10.2 7.5 35.4 3.7 3.2 9.6
June 8.7 6.7 11.4 8.7 36.0 4.4 3.7 10.8
1 Excluding vegetable and fruit prices.
2 Since March 2005 – Bank of Russia estimate.
Statistical Addendum
2008 Q2 29
Table 3
Consumer prices by group of goods and services
(month on month of previous year, %)
Monthly
inflation
Core
inflation
Food price
growth
Food price
growth1
Vegetable
and fruit price
growth
Non-food
price growth
Growth in non-
food prices
excluding petrol
prices2
Service price
growth
January 10.7 8.2 10.2 9.1 21.1 6.5 6.0 18.1
February 11.2 8.7 11.9 10.1 28.4 6.6 6.1 16.7
March 10.6 8.7 10.9 10.0 19.2 6.7 6.1 16.1
April 9.8 8.2 9.4 9.0 12.7 6.4 6.0 15.9
May 9.4 7.9 8.7 8.5 11.1 6.4 6.0 15.6
June 9.0 7.8 8.0 8.1 7.0 6.4 6.0 15.3
July 9.3 7.8 8.7 8.3 11.9 6.3 5.9 15.0
August 9.6 7.9 9.2 8.5 15.6 6.6 6.0 15.0
September 9.5 7.9 9.3 8.5 16.4 6.2 5.8 14.5
October 9.2 7.8 8.8 8.3 14.4 6.1 5.7 14.1
November 9.0 7.8 8.7 8.3 12.4 6.0 5.7 13.9
December 9.0 7.8 8.7 8.5 10.3 6.0 5.7 13.9
January 8.2 7.7 7.6 8.0 3.1 6.0 5.7 12.3
February 7.6 6.9 5.3 6.6 -5.1 5.8 5.6 14.2
March 7.4 6.7 4.9 6.2 -5.2 5.8 5.6 14.0
April 7.6 6.8 5.4 6.3 -1.9 5.9 5.8 13.9
May 7.8 6.7 5.9 6.3 3.0 5.9 5.7 13.8
June 8.5 6.9 7.7 6.6 16.2 5.9 5.7 13.7
July 8.7 7.3 8.3 7.4 15.3 5.9 5.8 13.7
August 8.6 7.8 8.3 8.3 7.5 5.7 5.8 13.4
September 9.4 8.7 10.0 10.0 10.2 5.8 6.1 13.4
October 10.8 10.3 13.6 13.4 15.9 6.0 6.3 13.1
November 11.5 10.9 14.9 14.4 19.8 6.3 6.4 13.2
December 11.9 11.0 15.6 14.9 22.2 6.5 6.4 13.3
January 12.6 11.5 16.7 15.6 27.1 6.8 6.6 14.1
February 12.7 12.1 17.6 16.4 29.1 7.0 6.8 12.7
March 13.3 12.7 19.1 17.5 32.5 7.4 7.1 12.7
April 14.3 13.5 20.7 19.1 35.6 8.0 7.4 13.3
May 15.1 14.5 22.1 20.7 33.9 8.4 7.7 13.9
June 15.1 15.1 21.3 21.6 19.9 8.9 7.9 14.4
1 Excluding vegetable and fruit prices.
2 Since March 2005 – Bank of Russia estimate.
30 2008 Q2
Table 4
Inflation growth over period since start of year due to price changes
by group of goods and services (percentage points)
Foodstuffs1 Non-food
products
Paid
services
Vegetables and
fruit
Inflation over
period, %
Core
inflation
Non-core
inflation2
January 0.4 0.2 1.5 0.4 2.4 0.6 1.8
February 1.1 0.3 1.7 1.0 4.1 1.5 2.6
March 1.5 0.5 1.9 1.2 5.0 2.1 2.9
April 1.6 0.6 2.0 1.1 5.4 2.5 2.9
May 1.7 0.7 2.2 1.3 5.9 2.7 3.1
June 1.8 0.8 2.4 1.2 6.2 3.0 3.2
July 2.0 0.9 2.5 1.4 6.9 3.4 3.5
August 2.3 1.2 2.7 0.9 7.1 3.9 3.2
September 2.6 1.5 2.9 0.3 7.2 4.6 2.6
October 2.7 1.7 3.0 0.1 7.5 5.0 2.5
November 3.0 1.9 3.1 0.3 8.2 5.5 2.7
December 3.3 2.0 3.3 0.4 9.0 6.1 3.0
January 0.2 0.1 1.2 0.2 1.7 0.5 1.2
February 0.4 0.3 1.8 0.3 2.8 0.9 1.9
March 0.6 0.4 2.0 0.4 3.4 1.3 2.1
April 0.8 0.5 2.1 0.6 4.0 1.7 2.3
May 0.8 0.7 2.3 0.9 4.7 1.9 2.7
June 1.0 0.8 2.4 1.5 5.7 2.3 3.4
July 1.5 0.9 2.6 1.6 6.6 3.0 3.6
August 2.1 1.1 2.7 0.7 6.7 3.9 2.8
September 3.0 1.4 2.9 0.3 7.5 5.3 2.3
October 4.3 1.7 2.9 0.3 9.3 7.0 2.3
November 4.9 2.0 3.1 0.6 10.6 7.9 2.7
December 5.4 2.3 3.3 0.9 11.9 8.7 3.2
January 0.4 0.2 1.3 0.3 2.3 0.8 1.5
February 0.9 0.4 1.7 0.5 3.5 1.6 1.9
March 1.4 0.7 1.9 0.8 4.8 2.5 2.3
April 2.1 1.0 2.1 1.0 6.3 3.6 2.7
May 2.6 1.3 2.4 1.4 7.7 4.5 3.2
June 3.1 1.6 2.7 1.4 8.7 5.3 3.5
1 Excluding vegetables and fruit..
2 Growth in prices of goods and paid services not included in calculation of core consumer price index.
Statistical Addendum
2008 Q2 31
Table 5
Monthly inflation growth due to price changes
by group of goods and services (percentage points)
Foodstuffs1 Non-food
products
Paid
services
Vegetables
and fruit
Inflation over
period, %
Core
inflation
Non-core
inflation2
January 0.4 0.2 1.5 0.4 2.4 0.6 1.8
February 0.7 0.2 0.2 0.5 1.7 0.9 0.7
March 0.4 0.1 0.2 0.2 0.8 0.6 0.3
April 0.1 0.1 0.1 0.0 0.4 0.3 0.0
May 0.1 0.1 0.1 0.1 0.5 0.3 0.2
June 0.0 0.1 0.2 0.0 0.3 0.2 0.1
July 0.3 0.1 0.2 0.1 0.7 0.4 0.3
August 0.3 0.2 0.2 -0.5 0.2 0.5 -0.3
September 0.2 0.3 0.1 -0.5 0.1 0.6 -0.5
October 0.1 0.2 0.1 -0.2 0.3 0.4 -0.1
November 0.2 0.2 0.1 0.1 0.6 0.5 0.2
December 0.3 0.1 0.2 0.1 0.8 0.5 0.3
January 0.2 0.1 1.2 0.2 1.7 0.5 1.2
February 0.2 0.1 0.7 0.1 1.1 0.4 0.7
March 0.2 0.1 0.1 0.1 0.6 0.4 0.2
April 0.2 0.1 0.1 0.1 0.6 0.4 0.2
May 0.1 0.1 0.1 0.3 0.6 0.2 0.4
June 0.2 0.1 0.2 0.6 1.0 0.3 0.6
July 0.5 0.1 0.2 0.1 0.9 0.7 0.2
August 0.6 0.2 0.1 -0.8 0.1 0.8 -0.7
September 0.8 0.3 0.1 -0.4 0.8 1.3 -0.5
October 1.3 0.3 0.0 0.0 1.6 1.6 0.0
November 0.5 0.3 0.2 0.2 1.2 0.8 0.4
December 0.5 0.2 0.2 0.2 1.1 0.7 0.5
January 0.4 0.2 1.3 0.3 2.3 0.8 1.5
February 0.4 0.2 0.3 0.2 1.2 0.8 0.4
March 0.5 0.3 0.2 0.3 1.2 0.8 0.3
April 0.6 0.3 0.3 0.2 1.4 1.0 0.4
May 0.5 0.3 0.3 0.3 1.4 0.9 0.5
June 0.4 0.3 0.3 0.0 1.0 0.7 0.2
1 Excluding vegetables and fruit.
2 Growth in prices of goods and paid services not included in calculation of core consumer price index.
32 2008 Q2
Table 6
Contribution to inflation growth over period since start of year
by group of goods and services (%)
Foodstuffs1 Non-food products Paid services Vegetables and fruit Core inflation Non-core inflation2
January 16.0 6.1 59.5 18.3 24.5 75.5
February 27.2 7.7 40.9 24.1 37.2 62.8
March 30.1 9.1 37.6 23.2 42.4 57.6
April 30.5 10.3 37.9 21.3 45.7 54.3
May 29.3 11.8 37.2 21.8 46.7 53.3
June 28.6 12.9 38.3 20.2 48.4 51.6
July 29.6 13.5 36.7 20.2 49.7 50.3
August 32.7 16.8 38.5 12.1 55.4 44.6
September 35.7 20.2 39.6 4.5 63.4 36.6
October 36.3 22.4 39.4 2.0 66.7 33.3
November 36.2 22.9 37.8 3.2 67.3 32.7
December 36.5 22.5 36.4 4.5 67.1 32.9
January 13.4 8.3 69.0 9.3 29.5 70.5
February 14.9 9.2 65.3 10.6 31.3 68.7
March 17.8 11.6 58.1 12.5 38.3 61.7
April 19.6 13.5 52.9 14.1 42.8 57.2
May 18.0 14.3 48.3 19.4 41.6 58.4
June 17.6 13.7 42.7 26.0 40.4 59.6
July 22.9 13.9 39.2 23.9 45.8 54.2
August 31.7 16.9 40.8 10.6 58.5 41.5
September 39.3 18.7 37.9 4.1 69.9 30.1
October 46.6 18.6 31.1 3.7 75.4 24.6
November 46.3 19.2 28.8 5.7 74.5 25.5
December 45.7 19.4 27.8 7.2 72.8 27.2
January 18.9 9.3 58.1 13.7 36.2 63.8
February 25.1 12.1 47.9 14.9 46.1 53.9
March 29.7 14.7 39.0 16.6 52.7 47.3
April 33.0 16.5 33.9 16.6 57.0 43.0
May 34.2 17.1 31.1 17.6 58.5 41.5
June 35.2 18.2 30.8 15.7 60.5 39.5
1 Excluding vegetables and fruit.
2 Growth in prices of goods and paid services not included in calculation of core consumer price index.
Statistical Addendum
2008 Q2 33
Table 7
Contribution to monthly inflation growth
by group of goods and services (%)
Foodstuffs1 Non-food products Paid services Vegetables and fruit Core inflation Non-core inflation2
January 16.0 6.1 59.5 18.3 24.5 75.5
February 43.4 10.0 14.0 32.6 55.8 44.2
March 43.9 15.8 21.6 18.7 67.5 32.5
April 35.8 27.0 41.3 -4.2 90.9 9.1
May 16.1 27.6 29.9 26.4 57.3 42.7
June 15.3 34.9 59.7 -10.0 81.6 18.4
July 37.6 19.0 23.4 20.0 60.9 39.1
August 140.5 132.4 97.9 -270.7 249.5 -149.5
September 269.8 290.1 128.8 -588.7 678.9 -578.9
October 51.0 73.9 34.6 -59.5 145.8 -45.8
November 34.7 29.1 19.3 16.9 74.1 25.9
December 39.6 19.0 23.2 18.2 64.4 35.6
January 13.4 8.3 69.0 9.3 29.5 70.5
February 17.1 10.6 59.7 12.6 34.2 65.8
March 31.4 22.7 24.5 21.4 70.7 29.3
April 30.0 24.6 22.3 23.1 69.6 30.4
May 8.4 19.5 20.6 51.6 34.4 65.6
June 15.8 10.7 17.0 56.5 35.1 64.9
July 55.9 15.7 17.4 10.9 79.2 20.8
August 724.2 250.9 165.2 -1,040.4 1,016.5 -916.5
September 99.9 33.4 14.7 -48.0 160.7 -60.7
October 78.5 18.2 1.2 2.1 99.3 0.7
November 43.6 23.6 13.3 19.5 67.8 32.2
December 39.2 21.6 19.2 20.0 56.7 43.3
January 18.9 9.3 58.1 13.7 36.2 63.8
February 36.8 17.4 28.5 17.3 64.9 35.1
March 43.2 22.6 12.8 21.4 72.2 27.8
April 43.5 22.0 17.6 16.9 70.3 29.7
May 39.1 20.1 18.9 21.9 65.2 34.8
June 42.7 26.5 28.7 2.2 74.5 25.5
1 Excluding vegetables and fruit.
2 Growth in prices of goods and services not included in calculation of core consumer price index.
34 2008 Q2
Year Q1 Q2 Q3 Q4
Macroeconomic indicators
GDP
over period since start of year, billion rubles
2006 5,845 12,206 19,487 26,880
2007 6,748 14,497 23,324 32,987
2008 8,838
over period since start of year, as % of corresponding period of previous
year
2006 106.3 106.91 107.11 107.4
2007 107.4 107.8 107.6 108.1
2008 108.5
as % of corresponding quarter of previous year
2006 106.3 107.4 107.5 108.0
2007 107.4 108.1 107.3 109.5
2008 108.5
Industrial output indices
as % of corresponding quarter of previous year
2006 104.1 106.6 106.9 107.5
2007 107.2 107.1 105.5 105.7
2008 106.2 105.5
over period since start of year, as % of corresponding period of previous
year
2006 104.1 105.3 105.9 106.3
2007 107.2 107.1 106.6 106.3
2008 106.2 105.8
Agricultural output
as % of corresponding quarter of previous year
2006 102.1 101.8 101.4 110.4
2007 103.4 104.3 103.0 103.1
2008 104.5 104.2
over period since start of year, as % of corresponding period of previous
year
2006 102.1 101.9 101.6 103.6
2007 103.4 104.0 103.4 103.3
2008 104.5 104.3
Fixed capital investment
over period since start of year, billion rubles
2006 658.4 1,676.0 2,963.3 4,730.0
2007 916.6 2,365.7 4,129.3 6,626.8
2008 1,295.9 3,256.1
as % of corresponding quarter of previous year
2006 108.8 117.7 116.1 120.3
2007 122.8 124.2 118.2 120.6
2008 120.2 114.9
Retail trade turnover
over period since start of year, billion rubles
2006 1,857.2 3,925.3 6,162.6 8,711.9
2007 2,257.3 4,799.2 7,597.6 10,866.2
2008 2,933.6 6,236.7
as % of corresponding quarter of previous year
2006 111.4 113.6 115.3 115.3
2007 114.7 115.7 116.7 116.7
2008 116.5 114.1
Federal budget on accrual
basis, as of end of period
revenue
billion rubles
2006 1,399.1 2,938.1 4,561.0 6,278.9
2007 1,421.9 3,245.7 5,087.6 7,781.1
2008 1,932.7 4,370.7
as % of GDP
2006 24.0 24.1 23.4 23.4
2007 21.1 22.4 21.8 23.6
2008 21.9 23.22
expenditure
billion rubles
2006 823.2 1,854.7 2,866.5 4,284.8
2007 945.6 2,169.7 3,464.3 5,986.6
2008 1,332.7 2,995.6
as % of GDP
2006 14.1 15.2 14.7 16.0
2007 14.0 15.0 14.8 18.2
2008 15.1 15.92
Federal budget surplus on accrual basis,
as of end of period
billion rubles
2006 575.9 1,083.4 1,694.6 1,994.1
2007 476.3 1,076.1 1,623.2 1,794.6
2008 600.0 1,375.1
as % of GDP
2006 9.9 8.9 8.7 7.4
2007 7.1 7.4 7.0 5.4
2008 6.8 7.32
Table 8
Russia’s key macroeconomic and financial indicators
Note. T able 8 has been compiled from data collected by the Bank of Russia, the Federal State Statistics Service, the Ministry of
Finance of the Russian Federation and the Federal T reasury. Beginning from April 2006, pursuant to Bank of Russia Ordinance
No. 1660-U, dated February 17, 2006, the calculation of interest rates on bank lending and deposit operations includes data
reported by branches of credit institutions.
Statistical Addendum
2008 Q2 35
Year Q1 Q2 Q3 Q4
Socio-economic indicators
Nominal imputed average
monthly per employee wage
rubles
2006 9,397 10,401 10,949 12,203
2007 11,876 12,993 13,494 15,742
2008 15,424 16,981
as % of corresponding quarter of previous year
2006 122.3 125.1 125.1 125.2
2007 127.3 125.9 124.0 129.3
2008 128.0 129.4
over period since start of year, as % of corresponding period of previous
year
2006 122.3 123.7 124.1 124.3
2007 127.3 126.6 125.7 127.8
2008 128.0 128.7
Real imputed average monthly per employee wage, as % of corresponding quarter of previous year
2006 110.3 114.3 114.3 114.8
2007 118.2 116.6 113.9 116.1
2008 113.4 112.7
Household money income (per capita monthly average), rubles
2006 8,200.0 9,933.9 10,253.3 12,316.8
2007 9,901.4 11,953.8 12,700.8 15,604.6
2008 12,333.4 14,938.2
Household real disposable
money income
as % of corresponding quarter of previous year
2006 109.9 115.5 114.5 113.7
2007 110.0 109.1 111.8 111.0
2008 109.4 106.9
over period since start of year, as % of corresponding period of previous
year
2006 109.9 … … 113.5
2007 110.0 109.5 110.4 110.7
2008 109.4 108.1
Household expenditures as %
of income
purchase of goods and services
2006 73.1 67.7 71.0 65.6
2007 74.1 69.4 71.3 65.8
2008 76.4 70.8
compulsory payments and contributions
2006 10.8 10.3 10.4 10.5
2007 12.8 12.4 12.0 13.0
2008 12.7 13.0
growth in savings
2006 11.1 10.7 8.3 11.3
2007 9.8 8.5 6.8 10.6
2008 7.8 8.7
purchase of foreign exchange
2006 7.4 7.0 7.2 6.0
2007 5.2 5.3 5.2 5.2
2008 6.9 4.7
cash on hand
2006 -2.5 4.3 3.2 6.7
2007 -1.9 4.4 4.7 5.4
2008 -3.8 2.8
Average imputed pension, total, rubles
2006 2,539 2,727 2,800 2,839
2007 2,846 3,091 3,108 3,299
2008 3,823 4,044
Real imputed pension
as % of corresponding quarter of previous year
2006 107.8 107.2 103.7 102.5
2007 104.1 104.9 102.0 104.3
2008 119.0 113.9
over period since start of year, as % of corresponding period of previous
year
2006 107.8 107.5 106.1 105.1
2007 104.1 104.5 103.6 103.8
2008 119.0 116.4
Total number of unemployed
(calculated using ILO
methodology)
million
2006 5.7 5.5 5.0 5.0
2007 5.2 4.5 4.3 4.4
2008 5.1 4.8
as % of economically active population
2006 7.8 7.4 6.7 6.8
2007 7.0 6.0 5.7 5.8
2008 6.9 6.4
Table 8 (continued)
36 2008 Q2
Year Q1 Q2 Q3 Q4
Foreign economic activities
Price of Urals crude
over period since start of year, $/barrel
2006 57.7 61.1 62.5 60.9
2007 54.0 59.7 64.0 69.5
2008 93.7 105.3
as % of corresponding period of previous year
2006 134.0 134.7 126.7 120.9
2007 93.5 97.7 102.4 114.1
2008 173.7 176.3
Exports of goods
over period since start of year, $ billion
2006 67.3 143.9 223.7 303.6
2007 71.7 155.4 244.9 354.4
2008 110.4 240.01
as % of corresponding period of previous year
2006 134.1 131.1 128.1 124.5
2007 106.5 108.0 109.5 116.8
2008 153.9 154.41
Imports of goods
over period since start of year, $ billion
2006 30.9 69.7 112.3 164.3
2007 42.8 95.5 153.9 223.5
2008 60.2 135.21
as % of corresponding period of previous year
2006 120.1 126.4 128.2 131.0
2007 138.6 137.1 137.0 136.0
2008 140.8 141.51
Current account (over period since start of year), $ billion
2006 30.4 54.7 78.6 94.3
2007 22.3 36.6 51.9 76.2
2008 37.7 69.41
Private sector net capital outflow (inflow) (over period since start of year), $ billion
2006 -5.6 15.0 27.4 41.8
2007 14.1 68.7 61.7 83.2
2008 -23.4 12.31
Foreign investment in nonfinancial sector
(according to Rosstat data)
over period since start of year, $ billion
2006 8.8 23.4 35.3 55.1
2007 24.6 60.3 87.9 120.9
2008 17.3 46.5
as % of corresponding period of previous year
2006 146.0 141.9 131.7 102.7
2007 2.8 times 2.6 times 2.5 times 2.2 times
2008 70.1 77.1
of which
direct
over period since start of year, $ billion
2006 3.8 6.4 10.3 13.7
2007 9.8 15.8 19.6 27.8
2008 5.6 11.1
as % of corresponding period of previous year
2006 2.0 times 143.6 155.5 104.6
2007 2.5 times 2.5 times 191.3 2.0 times
2008 57.2 70.0
portfolio
over period since start of year, $ billion
2006 0.2 0.5 0.7 3.2
2007 0.2 1.1 1.5 4.2
2008 0.1 1.2
as % of corresponding period of previous year
2006 2.9 times 2.9 times 182.3 7.0 times
2007 85.8 2.2 times 2.3 times 131.8
2008 62.5 104.4
other
over period since start of year, $ billion
2006 4.7 16.5 24.4 38.2
2007 14.7 43.4 66.7 89.0
2008 11.5 34.3
as % of corresponding period of previous year
2006 117.2 139.1 122.8 95.3
2007 3.1 times 2.6 times 2.7 times 2.3 times
2008 78.7 79.0
Russia’s international reserves (as of end of period), $ billion
2006 205.9 250.6 266.2 303.7
2007 338.8 405.8 425.4 477.9
2008 511.8 568.3
Real ruble exchange rate indices, last month of
quarter (as % of December of previous year)3
ruble vs. US dollar
2006 6.9 10.0 12.1 16.7
2007 2.3 3.8 8.1 15.0
2008 6.5 8.5
ruble vs. euro
2006 6.5 4.9 6.0 5.6
2007 3.1 4.1 4.5 5.8
2008 0.6 3.4
effective rate
2006 6.2 7.0 7.9 7.4
2007 2.7 3.3 3.8 5.1
2008 1.5 3.3
Table 8 (continued)
Statistical Addendum
2008 Q2 37
Year Q1 Q2 Q3 Q4
Financial market indicators (including Sberbank rates)
Average for period
Overnight interbank credit
rate, % p.a.
in rubles
2006 3.2 2.8 2.6 5.1
2007 3.9 3.4 4.9 5.4
2008 3.9 4.1
in US dollars
2006 4.4 4.8 5.2 5.2
2007 5.2 5.2 5.1 4.5
2008 3.2 2.2
OFZ yields4, % p.a.
2006 6.8 6.9 6.8 6.7
2007 6.6 6.6 6.6 6.6
2008 6.7 6.9
Interest rate on household
time deposits, % p.a.
up to 1 year in rubles
2006 8.3 7.9 7.6 7.7
2007 7.4 7.3 7.0 7.2
2008 7.0 7.1
over 1 year in rubles
2006 7.6 5.2 5.2 5.4
2007 7.9 7.5 7.1 6.8
2008 7.4 8.0
up to 1 year in US dollars
2006 5.6 5.7 5.7 5.9
2007 5.4 5.3 5.2 5.2
2008 5.1 5.8
over 1 year in US dollars
2006 6.2 4.6 5.0 5.5
2007 6.8 6.6 6.4 7.0
2008 6.9 7.0
Interest rate on credit to non-
financial enterprises, % p.a.
up to 1 year in rubles
2006 10.4 10.6 10.3 10.4
2007 9.9 9.6 9.8 10.7
2008 10.9 11.2
over 1 year in rubles
2006 12.7 12.7 12.5 12.1
2007 12.1 11.5 11.0 11.4
2008 12.3 12.8
up to 1 year in US dollars
2006 8.6 8.4 8.6 8.5
2007 8.7 8.8 8.4 9.1
2008 8.1 8.0
over 1 year in US dollars
2006 10.5 10.2 10.4 10.0
2007 10.3 10.1 9.3 9.8
2008 9.3 9.9
Interest rate on ruble-denominated promissory notes discounted by banks, % p.a.
2006 12.9 8.7 9.2 9.7
2007 9.5 8.9 10.8 10.8
2008 10.7 11.0
MICEX rate in ‘tomorrow’ trades, ruble/$
2006 28.0733 27.1897 26.8053 26.5910
2007 26.3056 25.8599 25.5043 24.6525
2008 24.2286 23.6190
As of end of quarter
RTS index, points
2006 1,434.99 1,494.63 1,549.99 1,921.92
2007 1,935.72 1,897.70 2,071.80 2,290.51
2008 2,053.93 2,303.34
Refinance rate, % p.a.
2006 12 11.5 11.5 11
2007 10.5 10 10 10
2008 10.25 10.75
Table 8 (continued)
38 2008 Q2
Table 8 (end)
Year 1.01 1.04 1.07 1.10
Monetary indicators
M0, billion rubles
2006 2,009.2 1,928.8 2,233.4 2,400.8
2007 2,785.2 2,741.2 3,027.5 3,220.9
2008 3,702.2 3,475.5 3,724.9
M2, billion rubles
2006 6,044.7 6,169.4 7,090.8 7,750.7
2007 8,995.8 9,412.6 10,857.7 11,494.0
2008 13,272.1 13,382.9 14,244.7
Obligations included in broad money, billion rubles5 2007 10,149.4 10,898.4 12,033.4 12,699.7
2008 14,636.7 14,918.3 15,926.62
Net foreign assets, billion rubles5 2007 6,881.5 7,927.4 8,714.1 9,047.0
2008 9,923.1 10,540.8 11,282.42
Domestic claims, billion rubles5 2007 5,799.2 5,798.6 6,331.1 6,771.7
2008 8,325.9 8,437.2 8,760.62
Broad monetary base, billion rubles
2006 2,914.2 2,721.4 3,287.0 3,486.0
2007 4,122.4 4,210.2 5,139.1 4,587.2
2008 5,513.3 4,871.4 5,422.9
Balances of correspondent accounts, billion rubles
2006 508.6 320.0 430.9 443.7
2007 638.1 518.1 528.7 576.3
2008 802.2 596.3 592.4
M2 velocity
annual average
2006 4.4 4.3 4.1 4.0
2007 3.8 3.6 3.4 3.2
2008 3.1 3.0 3.02
change since start of year, %
2006 -6.5 -1.4 -4.8 -8.3
2007 -13.2 -6.1 -12.2 -16.3
2008 -18.8 -2.7 -3.02
Monetisation of the economy (by M2 aggregate), %
2006 22.7 23.0 23.8 24.7
2007 26.1 27.8 29.8 31.2
2008 32.2 33.1 33.22
Money multiplier
by broad monetary base
2006 2.07 2.27 2.16 2.23
2007 2.18 2.24 2.11 2.51
2008 2.41 2.75 2.63
change since start of year, %
2006 13.2 9.3 4.0 7.3
2007 5.2 2.5 -3.2 14.8
2008 10.3 14.1 9.1
Foreign exchange rates
rubles per US dollar
2006 28.78 27.70 26.94 26.78
2007 26.33 26.01 25.82 24.95
2008 24.55 23.50 23.41
rubles per euro
2006 34.19 33.63 34.24 33.98
2007 34.70 34.69 34.72 35.35
2008 35.93 37.09 36.97
1 Estimate.
2 Preliminary data.
3 (+) signifies appreciation of the ruble, (-) signifies depreciation of the ruble.
4 Effective OFZ market portfolio indicator.
5 Presented in new format in compliance with requirements of the Monetary and Financial Statistics Manual (IMF, 2000).
Statistical Addendum
2008 Q2 39
Table 9
Bank of Russia interest rates in 2008
Type of
instrument Purpose Instrument Liquidity injection/absorption period
Interest rate, % p.a.
Before
4.02.08
Before
29.04.08
Before
10.06.08
Before
14.07.08
After
14.07.08
Open- market
operations
Liquidity injection
Lombard auctions 2 weeks/not lower than 7 7.25 7.5 7.75 8
Auction-based (exchange and over-the-
counter) direct repo operations
1-7days/ not lower than 6 6.25 6.5 6.75 7
1 week/not lower than 6.5 6.75 7 7.25 7.5
3 months 9 9.75 Operations suspended
Purchase of government securities and
OBR – –
Foreign exchange purchase – –
Liquidity
absorption
Deposit auctions
4 weeks
Set by auction results
3 months
Bank of Russia bonds (including outright
sales) Up to 6 months Set by auction results
Government securities sales – –
Foreign exchange sales – –
Continually
conducted
operations
Liquidity injection
Loans1,2
Intraday 0
Overnight 10 10.25 10.5 10.75 11
Loans secured by non-marketable assets2 Up to 30 days 9.25 9.5 9.75 10
Loans extended against the collateral
of bills, claims under enterprise credit
agreements or bank sureties3
Up to 90 days 7 7.25 7.5 7.75 8
91 to 180 days 8 8.25 8.5 8.75 9
Lombard loans1
1 day 8 8.25 8.5 8.75 9
7 days Set by average weighted Lombard auction rate4
Direct repo
1 to 7 days 8 8.25 8.5 8.75 9
1 week 7 7.25 7.5 7.75 8
Currency swap Overnight (rubles part) 8 8.25 8.5 8.75 9
Liquidity
absorption Deposit operations
Tom-next, spot-next and call 2.75 3.25 3 3.5 3.75
1 week, spot-week 3.25 3.5 3.75 4 4.25
1 Pursuant to Bank of Russia Regulation No. 236-P of August 4, 2003.
2 Pursuant to Bank of Russia Regulation No. 312-P of November 12, 2007.
3 Pursuant to Bank of Russia Regulation No. 273-P of July 14, 2003.
4 9% if two consecutive Lombard auctions are declared invalid (8.75% before 14.07.08; 8.5% before 10.06.08; 8.25% before 29.04.08; 8% before 4.02.08).
40 2008 Q2
Table 10
Credit institutions’ required reserve ratios (%)
Required reserve ratio for credit institutions’
obligations to non-resident banks in Russian
and foreign currency
Required reserve ratio for obligations to
individuals in Russian currency
Required reserve ratio for other obligations
of credit institutions in Russian and foreign
currency
July 1, 2007 – February 29, 2008 4.5 4.0 4.5
March 1, 2008 – June 30, 2008 5.5 4.5 5
July 1, 2008 – August 31, 2008 7.0 5.0 5.5
Since September 1, 2008 8.5 5.5 6.0
© The Central Bank of the Russian Federation, 2008
Research and Information Department