Page 103 - RusRPTNov23

sustainable disinflationary trends in the economy.
Economic activity is growing across a wide range of industries. High domestic demand is intensifying the upward deviation of the Russian economy from the balanced growth path. This is also the reason behind a persistently elevated demand for imports. High demand for imports coupled with reduced exports is a key factor of the ruble’s depreciation since early 2023. Demand for imports will be adjusting to the weaker ruble and the adopted key rates decisions in the coming quarters.
The expansion of private demand along with a continuously high level of public demand is facilitating strong growth in domestic demand. Growing consumer activity is supported by the expansion of lending, increased real wages, and the adjustment of households to the new structure of supply in commodity markets.
The Russian economy has completed the recovery phase. That means that its further growth will slow down due to supply-side constraints. First of all, it concerns the labour market which is becoming tighter. Unemployment has dropped to a new historical low. Concurrently, low geographic and cross-sectoral labour force mobility is an additional structural constraint.
The Bank of Russia’s monetary policy pursued will create the conditions for returning the economy to the balanced growth path. In its baseline scenario, the Bank of Russia forecasts that the GDP growth rate will be 1.5–2.5% in 2023, 0.5–1.5% in 2024, 1.0–2.0% in 2025, and 1.5–2.5% in 2026.
The Bank of Russia admits additional tightening of its monetary policy for reaching inflation of 4% in 2024, the regulator’s Deputy Governor Alexey Zabotkin said on October 10 addressing the State Duma (lower house of the parliament). According to the Central Bank’s projections provided in September, the key rate is expected at 11.5-12.5% in 2024 (up from 8.5-9.5% in the previous forecast). In 2025, the regulator expects it at 7-8% (up from 6.5-8.5% projected earlier). The forecast for 2026 has not changed, standing at 5.5-6.5%.
The CBR expects annual inflation to reach peak levels next spring-summer, the regulator’s Deputy Governor Alexey Zabotkin said on October 11. "The highest level of annual inflation will probably be passed in spring-summer," he told reporters. Zabotkin said that the Bank of Russia would "consider the reasonability of additionally raising the rate relying on the revised outlook." According to the Central Bank, considering its current monetary policy annual inflation in the country will total 6-7% in 2023, return to 4% in 2024 and remain close to 4% in the future.
103 RUSSIA Country Report November 2023 www.intellinews.com