Page 15 - RusRPTSept23

At the start of the year the CBR forecast growth this year would be in the band -1% to +1% but now the regulator is predicting growth of between 1.5% and 2.5% for this year.
The central bank's new projections suggests an expected GDP expansion of 1.5–2.5% in 2024, followed by growth of 1–2% in 2025. (chart)
Russia’s GDP declined by 1.9% year on year in 1Q23, according to the preliminary estimates by statistics agency Rosstat in May, but as the summer kicked in the economy has made a strong recovery. Even international experts now believe the economy is doing far better than expected.
“The Russian economy has recovered from the downturn of spring 2022. The latest forecasts point to recovery of GDP this year. The IMF’s forecast now sees GDP growth of 1.5% this year, while the Bank of Russia forecast expects growth in the range of 1.5−2.5%. The July forecast average published by Consensus Economics puts growth this year at around half a percent,” the Bank of Finland institute for Emerging Economies (BOFIT) said in its weekly update on August 11.
Many analysts suggested that sanctions would mean Russia stagnates in the coming years and while growth of 2.5% is still well under Russia’s potential, it is probably enough to allow it to at least tread water.
At the start of this year many analysts said Russia’s maximum growth potential was 0.5% to 1% -- a rate where Russia’s economy stagnates.
Regarding inflation targets, the central bank plans to assess the necessity and timing of target reduction once stability is achieved near the 4% mark, alongside a reduction in overall economic uncertainty.
Inflation has started to rise again as expected and should end the year at around 6% according to the CBR, which put through a surprise 100bp rate hike in July to head off rising inflationary pressures. Another hike at the next meeting is also on the cards, say analysts. (chart)
Enhancing communication with the market is also on the central bank's agenda, with plans to disclose key details of negotiations concerning the dynamics of the key rate.
In the context of a floating ruble exchange rate, the central bank may engage in foreign currency transactions involving the Chinese yuan to uphold stability, the CBR said.
The ruble has significantly weakened this year. The ruble remained under the pressure of a declining foreign trade surplus in July, as sales of revenue of exporters in foreign currencies fell by 1.6% to $6.9bn, the central bank said in a report on August 8.
RUSSIA Country Report September 2023 www.intellinews.com