Page 52 - RusRPTOct23

As reported by bne IntelliNews, Russia’s liberal economic elite have been sounding increasingly optimistic recently as Russia’s economic performance continues to improve. At a conference last week Prime Minister Mikhail Mishustin declared “the worst is over” and that Russia is on track to grow by 2.8% this year. Russian Finance Minister Anton Siluanov also said the Ministry of Finance (MinFin) would hit its inflation target of “2% of GDP or less.”
Stronger demand conditions contributed to a fourteenth successive monthly expansion in output in September, reports S&P Global. The rate of growth was the fastest since June and broadly in line with the series trend. Panellists stated that the upturn was led by a sharper increase in new orders.
“New orders at Russian manufacturers rose at a steeper rate at the end of the third quarter, as the pace of expansion quickened to the fastest since the start of 2017,” said S&P Global. “Stronger client demand, new product launches and successful import substitution reportedly drove the upturn. The acceleration in growth was led by domestic demand, as new export orders increased at a slower and only marginal pace. Challenging economic conditions in key markets were noted as weighing on the rise in sales from abroad.” The economy has been boosted by heavy war spending which will account for over 6% in Russia’s 2024 budget and the rising price of oil. The majority of Russia’s oil exports are now going outside of the sanctions regime that is bringing in fresh revenues to the Russian budget.
The one problem the Kremlin’s economic managers still face is high inflation that is still rising.
Supplier price hikes and unfavourable exchange rate movements pushed up input costs, with the rate of inflation accelerating, S&P Global’s panellists said. “Firms passed through higher prices to customers, as charges rose markedly on the month,” said S&P Global. Inflation was 5% in July and is expected to rise another one or two percentage points by the end of this year.
Manufacturers recorded a sharper hike in input costs during September as demand often exceeds supply. The rate of input price inflation was marked and the quickest since March 2022. Companies also suggested that unfavourable exchange rate movements pushed up the price of imported goods.
Amid a more accommodative demand environment, manufacturing firms were able to pass through higher costs to customers. Selling prices rose at a substantial pace that was the steepest since April 2022.
A tight labour market is also a constriction on growth, but less of a problem than inflation. However, the lack of labour has been pushing up a rapid rise in nominal wages that is in turn feeding inflation.
52 RUSSIA Country Report October 2023 www.intellinews.com