Page 8 - RusRPTAug24

"We have recovered quickly, quicker than we expected ourselves, than expected by many. Growth rates are very high in 2023. Growth rates are high now and certainly, everybody wants to keep them. However, it seems to me that it is important for us to comprehend the current situation and understand that this is a long-distance run. This is not a short run but indeed a marathon distance, and furthermore, across the country and with barriers. We therefore need to estimate forces and understand how we work with constraints," she said.
However, as factories are essentially running at full capacity and human capital resources have been exhausted the economy may slow in 2025. In addition, a generous mortgage subsidy programme has been ended that will put a sharp break on growth. The CBR hiked rates sharply in July, but as inflation is not being caused by monetary problems, it seems the Kremlin is attempting to cool the economy by non-monetary means and has targeted the real estate sector instead.
THE CBR also upped the inflation forecast to 6.5% for 2024 (+1 p.p. compared to May figures) and to 4.5% for 2025 (+0.3 p.p.). Analysts expect inflation to return to the target 4% in 2026 and to remain at this level further on.
Moreover, analysts expect unemployment to go down to 2.6% in 2024 (-0.2 p.p.), up to 2.8% in 2025 (-0.2 p.p.) and return to the level of 2023 of 3% further on.
The price of Brent crude oil is expected at $84 per barrel on average in 2024. Further on the price will decline and equal $80 per barrel in 2025 and $75 per barrel in 2026-2027 (outlook unchanged).
High oil prices also mean the current account surplus will come in around $90bn in 2024, up from $51bn in 2023.
The petrodollars are flowing into the budget and deficit was a modest 0.5% in July, with the full year forecast for 0.8% on target and much less than 2023 end of year result of 1.9% of GDP.
On the ground, real incomes are rising strongly as nominal wages are rising much faster than inflation. Data from the World Bank show that Russians earned $14,250 per person last year in gross national income per capita. "Economic activity in Russia was affected by a significant increase in military activity in 2023," the bank's report says.
Real wages have grown by almost 14% this year, and the consumption of goods and services by around 25%, according to Rosstat. A further bump in real wages of up to 3.5% is expected this year, alongside an expected 3% jump in real disposable income, according to Russia’s Center for Macroeconomic Analysis and Short-Term Forecasting.
8 RUSSIA Country Report August 2024 www.intellinews.com