October 31, 2017 / 2:17 PM / 2 years ago

POLL-Russian retail sales to grow 1 pct in 2017, supporting economy

* reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/econ-polls?RIC=RUGDPYAP Reuters poll data

By Zlata Garasyuta and Jack Stubbs

MOSCOW, Oct 31 (Reuters) - Russia retail sales are seen increasing more than 1 percent this year as rising incomes fuel consumer demand, supporting a fragile recovery in the wider economy.

Retail sales plunged 5.2 percent last year as the economy was battered by lower oil prices and Western sanctions over Moscow’s actions in Ukraine.

But an improving outlook and rising wages have supported demand this year as wary consumers return to the shops after two hard years.

The median forecast of 22 analysts and economists polled by Reuters in the past week was for retail sales to rise by 1.1 percent year-on-year in 2017 and 2.3 percent in 2018.

Stronger retail sales should help the economy grow by 1.8 percent this year, the poll showed.

The improvement in living standards comes at a good time for Russian President Vladimir Putin, expected to run for re-election in March next year.

“After 2.5 years of contraction, real retail sales finally returned to growth in April and May, creating welcome momentum for spending to fully catch up with incomes,” said analysts at Citi.

“While the gap between recovering incomes and still struggling spending continues to be relatively wide, signs are emerging that the gap will close over the course of the year.”

End-2017 retail sales growth in the quarterly poll ranged from 1 percent to 4.2 percent, reflecting continued uncertainty among analysts.

Poll respondents forecast the Russian central bank lowering its key rate to 8 percent by the end of the year and to continue cutting in 25 basis point steps for the next four quarters.

As inflation slipped below the central bank’s 4 percent target, it delivered a cautious 25 basis point cut at its latest rate-setting meeting last Friday and said it would consider lowering rates further in the coming months.

“The rhetoric of the central bank after the Oct. 27 meeting supports the trend of a gradual rate lowering. The regulator clarified the formula, having emphasised the move from tight to neutral monetary policy,” said Natalia Vashchelyuk at B&N Bank.

“In our view, this all favours a systematic reduction of the key rate.”

Analysts also pointed to a gradual decline in the value of the rouble. In a year from now, the rouble is seen averaging 58.40 against the dollar, weakening to 59.90 by the end of 2018.

The rouble traded at 58.32 versus the dollar as of 1235 GMT on Tuesday, under pressure from lower oil prices and the end monthly tax payments by export-focused companies. (Editing by Andrey Ostroukh and Robin Pomeroy)

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