Page 6 - bneIntelliNews monthly country report Russia May 2024

1.0 Executive summary
Economic growth remains strong at the start of the year, In February 2024, GDP exceeded the level of the previous year by 7.7% year-over-year after an increase of 4.6% year-over-year in January. Russia is on course to grow somewhere between 2.2% and 3.6% this year according to various estimates.
The updated estimates of GDP growth in 4Q23 presented by Rosstat confirm the potential overheating of the Russian economy last year. Private and public consumption played a decisive role in GDP growth in 4Q23 and 2023 as a whole. The significance of the latter remains decisive at the beginning of 2024. Leading indicators indicate that economic growth remained strong in March.
The Bank of Russia's business climate indicator reached its highest level in more than ten years in March (and remained near its maximum level in April). Respondents note strong demand for their goods and services, as well as high investment activity in 1Q24.
Consumer demand in the economy at the beginning of 2024 is supported by a combination of factors such as rising wages (against the backdrop of record low unemployment), increased budget spending (has become the norm since 2023), as well as continued, albeit at a lower average rate, growth in retail lending.
The Finance Ministry published the results of a stress test at the end of April that used a scenario for 2024 of almost zero growth in GDP and household incomes, Reuters reported. The scenario presumed the ruble going as low as 97 against the US dollar. As a result of this hugely pessimistic scenario, the ministry said the exchange rate would average 106.9 rubles against the dollar in 2025. It also predicted that, in 2025, the price of a barrel of Russian oil would fall to $51.8 and GDP growth would be 0.2% (the baseline forecast is 2.3%).
The baseline scenario unveiled by Economy Minister Maxim Reshetnikov paints a rosier picture, with the ministry improving its GDP growth forecast for 2024 to 2.8%.But even in this, the most optimistic of three scenarios, the ministry worsened its inflation outlook and expects the rouble to steadily weaken. The conservative and stress scenarios envisage lower volumes of Russian oil and gas production and exports.
The central bank’s rate hikes in the second half of last year that took borrowing costs to 16% managed to halt the depreciation of the ruble and cooled the
6 RUSSIA Country Report May 2024 www.intellinews.com