Page 37 - RusRPTDec22

of monetary policy against the background of persistently high inflation, weak economic growth in China, supply disruptions, and lack of food security caused by Russia's invasion of Ukraine. As a result, the institution predicts economic growth in 2023 by only 2.7%, which is 0.2% less than the previous forecast. The challenges facing the world economy are enormous. Weakening economic indicators indicate further problems, the IMF added.
OECD expects a 3.9% GDP decline for the Russian economy in 2022. While a wide range of agencies share a negative outlook for Russian economic performance next year, OECD forecast is among the most pessimistic. Our estimates are more upbeat but nonetheless cautious – we expect 4% decline.
The European Commission has improved the outlook for the decrease of the Russian gross domestic product (GDP) to 5.1% from 10.4% in 2022, according to a document released in November. The forecast for 2023 deteriorated to a 2.3% decline from a 1.5% rise. The growth in 2024 was forecasted at 0.9%.
The CBR released its updated economic forecast for 2022‒2025. The previous forecast released in July expected the economy to contract by 4‒6% this year, while the latest outlook sees GDP contracting only by 3‒3.5%.
The forecast for the next year remains unchanged, i.e. the economy is expected to contract by 1‒4% next year and grow by 1.5‒2.5% a year in 2024 and 2025.
Domestic demand is forecasted to weaken less than previously expected this year. Household consumption is expected to contract by 3–3.5%, while investment could even rise in the range of 0–1%. Exports should contract by 15–16%, while imports decline by 22.5–23.5%.
On November 2, the Central Bank of Russia (CBR) published its “Main directions of unified state monetary policy for 2023 and the period of 2024 to 2025.”
In this document, the CBR forecasts the development of the Russian economy under “baseline,” “accelerated adaptation,” and “global crisis” scenarios. It also reiterates its main goal of achieving price stability with a flexible inflation targeting strategy, ultimately keeping inflation close to 4% permanently.
The “baseline scenario” assumes that persistently high inflation will lead to tightened monetary policy worldwide. It also takes into account the impact of current sanctions on the Russian economy. Under these conditions, the CBR expects to maintain a key rate of 6.5-8.5% during 2023 in order to reach the 4% inflation target in 2024. The Russian economy is expected to shrink in 2022, but transition to growth by the second half of 2023 into 2024, finally stabilizing at 1.5-2.5% growth in 2025.
The “accelerated adaptation” scenario is even more optimistic, assuming a large-scale global recession will be avoided, new economic ties will lead to better import dynamics, and Russian domestic demand will recover faster.
37 RUSSIA Country Report December 2022 www.intellinews.com