OREANDA-NEWS. The key rate set by the Bank of Russia can be increased by 1-1.5 percentage points (pp) by the end of this year, according to a review prepared by the rating agency, “Banking Sector Forecast for 2020: Spring Exacerbation”. Now the key rate is 6% per annum.

"The weakening of the national currency against the backdrop of weak oil quotes will accelerate inflation and exceed the target set by the Bank of Russia at 4%. As a result, the key rate can be increased by 1-1.5 percentage points by the end of 2020, and the pace the growth of the Russian economy will slow down to near-zero values", the material says.

Experts in a moderately negative scenario predict a decrease in the average annual price of Brent crude oil to $ 40-45 per barrel. However, in the absence of new agreements to resume the OPEC+ deal, the average annual price of Brent crude oil may drop below $ 35 per barrel. 

At the same time, analysts expect a decrease in the profitability of the banking sector according to the results of 2020 "primarily due to the realization of market risk from a negative revaluation of securities, as well as an increase in deductions to reserves for possible losses on loans". Also, pressure on profitability will have an increase in the cost of borrowed funds in connection with a decrease in the surplus of free liquidity in the sector.