8 Dec 2009 16:52

Refinancing rate could come down approx 1 pp in 2010

MOSCOW. Dec 8 (Interfax) - Russia could lower its refinancing rate approximately 1 percentage point and inflation could slow to 8% or just under in 2010, Arkady Dvorkovich, a Russian presidential aide, told reporters.

"I think there'll be a slight drop in inflation of 1-2 pp [compared with 2009] and that the refinancing rate might fall by up to 1 pp," he said.

Dvorkovich followed up with the comment that inflation might amount to "8% or perhaps a little lower, and the refinancing rate might decline by roughly 1 pp."

Inflation will amount to 9% or a little more in 2009, he said. The official forecast is for 9%-10%, but that could be lowered. "It would not be worthwhile to count on a substantial reduction in inflation in 2010," Dvorkovich said. Economic assessments that assume a substantial reduction in inflation in 2010 are even worse than those that foretell a reduction in demand or an overly slow recovery, he added.

The cost of capital on global markets will rise next year, "but not beginning from the start of the year," he said.

It will most likely be a multidimensional process in the sense that the cost of capital will decline inside Russia but increase in the West, he said.

The weighted-average loan interest rate in Russia next year will decline faster than the refinancing rate, due to the reduction in risk. The cost of borrowing for large and medium corporations is currently 14%-16%. "I think next year the average rate on loans to large and medium companies might decline by approximately 3 pp," Dvorkovich said.