Emerging Markets Analysis By Lloyds TSB

The Russian economy is forecast to have rebounded to 5.0% y/y in Q4, after being depressed by drought in the previous quarter. The Russian economy is forecast to have rebounded to 5.0% y/y in Q4, after being depressed by drought in the previous quarter. Industrial activity in both the mining and manufacturing sectors clearly picked up in the quarter. And while agricultural output may still be depressed, we are looking for an improvement after the sector contracted by nearly 17% q/q in Q3. Against a backdrop of improving economic conditions and strong inflationary pressures, we look for the Bank of Russia to raise its refinancing rate 25 bp to 8.0% – the first move since rates were cut to a record low in May 2010.

The South African economy is expected to have grown 5.4% saar in Q4, up from 2.6% in Q3. After experiencing a soft patch in Q3, manufacturing has rebounded in the last three months of 2010. Solid growth in this sector is expected to be complemented by a strong showing from the ‘wholesale & retail trade’ sector, as the recovery in household spending gathers momentum. Meanwhile, despite industrial action at the start of the quarter, mining activity should also make a key contribution to growth. In all, Tuesday’s result should see the SARB comfortable with their current monetary policy stance and we expect interest rates to remain on hold at 5.5% for the rest of 2011.