The speech of the Chairman of the Bank of Russia Elvira Nabiullina at a press conference on may 22, 2020
Good day, dear colleagues!
We are starting a regular press conference of the Bank of Russia on the current situation in the economy.
The last two weeks noted a more positive sentiment associated with the pending abolition of the coronavirus restrictive measures.
In many countries there are signals that the epidemic of the coronavirus is going down. The government gradually to remove or mitigate the constraints. This was supported by recovery in global financial and commodity markets: stock indices are rising, falling risk premium, expensive currencies of countries with emerging markets. Oil prices continued its recovery, our brand Urals is already close to 35 dollars per barrel, which is above the conservative assumptions that we have laid in the forecast for the year 2020.
But the markets live expectations, and tend to get ahead of developments. Current data on the situation in the global economy is still not so optimistic. In the United States and other Western countries continues to grow, unemployment, economic activity remains at a reduced level. In China, the economy has largely closed the failure of the January—February, but remains below the trajectory of growth that was expected for this year.
Russia’s industrial production in April fell by 6.6% year-on-year. It is less than many expected and less than in most other countries. Extractive industries, whose share in the Russian industry is high, kept the overall negative dynamics in the sector. However, the proliferation of secondary effects from the fall in final demand in related industries and the decline in oil production can have a negative impact on industrial production in may.
According to a survey by the Bank of Russia, in the period from 8 to 14 may, the share of enterprises faced with the cancellation or reduction of orders declined slightly and remains less than 50%. At the same time continued to rise, the share of companies, which celebrates the lack of working capital (up to 34% from 31% at the end of April) and marks the decline of demand for their products (47% vs. 45% at the end of April).
However, we note a marked recovery in the volume of payments through payment system of Bank of Russia, the analysis of which we published in a special Bulletin every Thursday. The last three weeks, the reduction of incoming payments, excluding extraction of minerals, production of petroleum products and activities of public administration from their “normal” level is kept somewhere at the level of 4-5%. This is a significant improvement compared to a drop of 18%, which we recorded in the first four hours of the week. Probably this restoration including reflects a General reduced level of activity in the first half of may last year, which we use as a comparison, and redistributing some of the payments deferred from the April non-working weeks. But even with this caveat, the normalization of payments in the economy this month there.
As for inflation, apparently, the acceleration of inflation associated with the weakening of the ruble and a temporary increase in demand for commodities, exhausted. Inflation last week was about zero inflation last two weeks have been stable just above 3%. In part this contributes to a noticeable strengthening of the ruble exchange rate in recent weeks amid the recovery in oil prices. According to a telephone survey on inflation expectations, respondents rarely have to talk about the high growth rate of prices in the next month, but still believe that inflation will be higher than at the beginning of the year. For a more complete assessment of the current level of inflationary pressures need to wait for a significant lifting of the restrictive measures that constrain both production and consumption. And as of the calculation base very low monthly values of the summer and autumn of last year, annual inflation is likely to increase. However, you can say that the temporary proinflationary factors were less significant than we set out in the April forecast. In the context of the predominance of further disinflationary trends the Central Bank has room for further easing of monetary policy.
The market situation indicates a certain decrease of risks to financial stability. Restored interest in our shares and bonds of foreign participants.
The volatility of the currency market with its elevated levels are approaching the border of “normality”. And OFZ yield dropped to historic lows. This creates an opportunity to reduce the General level of interest rates in the economy and supports the development of long-term debt instruments.
In connection with growth of oil prices above $ 25 per barrel the Bank of Russia now sells a currency in terms of the budget rules only to the extent of the regular operations of the Ministry of Finance. As we stated in March, until September 30, the currency received from the sale of Sberbank would be sold on the market in the case of reduction of prices on oil below $ 25 a barrel so to fully compensate for the fall in this case oil revenues. How we act after September 30, we’ll announce closer to the date, based on the situation.
A structural surplus of liquidity over the last years almost was not changed. The situation with ruble and foreign currency liquidity was stable.
Monday we begin month repo auctions. As we have said, auctions monthly and annual repo are designed to give more flexibility to credit institutions in liquidity management during the period when shifts in the urgency of their liabilities and assets and increases the heterogeneity of the distribution of liquidity within the banking system. It will also reduce the need for repo auctions “fine-tuning”. In particular it should support the willingness of banks to restructure the loans without fear that they will have a significant imbalance in the maturity of assets and liabilities. The first month repo auction, as planned, we will hold this Monday. It will amount to 500 billion rubles, which corresponds to the volume of repo fine-tuning that we conducted in March and April.
I note that the liquidity issued in the framework of repo auctions for a period of 1 month and 1 year will be taken into account when calculating the volumes of our regular (up to 1 week) operations to absorb liquidity. Therefore, the General amount of liquidity in the system, money market rates and the foreign exchange market, these operations are not significantly affected.
Now about the dynamics of the banking sector in may — we have data from 1 to number 19. Corporate portfolio stable in the beginning of the month it is somewhat shrunk, obviously, because of the holidays, but in the second decade banks totally dominated this decrease. Retail loans declined by 0.4%, continuing the trend that began in April (-0.7 PCT). The reasons for the latter — more conservative attitude of banks, restrictive measures and, probably, people’s fears about the ability to service new loans because of uncertainty of income.
With funding in General, the situation is quite calm. Funds of Russian companies in the accounts increased by 0.3%. The deposits are still slightly in the red (about 0.6%), but here the data on the staging date is not very significant, because traditionally, at the end of the month there’s a increase associated with accrued salaries, benefits, pensions, and in the beginning of the month, on the contrary, there spending, especially during long holidays. Therefore, it would be better to compare the figures at the end of the month.
Now the support.
Loan restructuring for individuals. For 2 months in total, the banks received 1.8 million applications in the last week — 190 thousand, it is less than the last week of April. Borrowers generally already made a decision about whether they need a vacation, and applied to the banks. Whether this trend is sustainable, will depend on the speed of economic recovery — in any case, citizens have the opportunity to apply until the end of September. The level of approval of applications increased slightly, we do not expect significant changes. The highest is the level of approval on the mortgage.
Restructuring of loans to small businesses. Two months of the program application for restructuring filed 122 thousand entrepreneurs. Over the past two weeks — 15 thousand. Unlike vacation credit for the citizens, there is no downward trend in the number of requests and appeals. The level of approvals in the last two weeks has not changed and amounted to 74%. To date, banks have restructured about 11% of the portfolio of loans to SMEs all SMEs and not only SMEs affected branches (this is 530 billion).
Payroll credits to businesses.
On may 20, submitted more than 58 thousand applications for such loans in excess of 140 billion roubles. Of them approved by more than half. This is in General a good level of approval, given that 25% of the credit risk not covered by the warranty of the Bank.
Also let me remind you that last week we have allocated additional benefit limit is 50 billion rubles at a rate of 3.5% on salary loans to big business.
More data on the dynamics of support programs reflected in the weekly review of the “Financial pulse”, which will be published tonight.
Thank you for your attention, I will now answer your questions.