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Fitch Ratings forecasts Russia's economic growth at 1.5% in 2019

Fitch Ratings expects Russia's economic growth to modestly accelerate to 1.9% in 2020

MOSCOW, February 16. /TASS/. Fitch Ratings forecasts Russia's economic growth to slow to 1.5% in 2019 and then to modestly accelerate to 1.9% in 2020.

"Fitch expects growth to slow to 1.5% in 2019 reflecting the impact of the VAT rate increase on consumption and weaker investment (especially given a higher base effect from 2018). We then expect growth to accelerate modestly to 1.9% in 2020, below the expected 3.2% for the 'BBB' median, supported by recovering private consumption and faster execution of government priority programmes," Fitch said in the report.

"Average inflation will increase from the historical low of 2.9% in 2018, to 5.3% in 2019 due to a higher VAT rate, the 2018 rouble depreciation and higher inflation expectations," the credit rating agency added.

"Nevertheless, Fitch forecasts inflation to return to the central bank target of 4% by 2020 in the absence of persistent effects from the VAT increase, negative supply shocks and further weakening of the rouble," Fitch noted.

"Fitch forecasts the federal budget surplus to reach 1.8% and 1.4% in 2019 and 2020, respectively, as higher-than-budgeted oil prices, and continued non-oil and gas revenue growth will comfortably offset expenditure increases in priority areas such as infrastructure," Fitch added.

"Increased exchange rate flexibility and compliance with the fiscal rule continue to support Russia's capacity to absorb external shocks and limit the impact of oil price volatility on the economy," the credit rating agency concluded.