Page 8 - RusRPTOct23

the very earliest. The CBR will have to keep rates high in 2024 and 2025 and growth will slow as a result.
Indeed, one of the main problems with the 2024 budget is it contains a very optimistic forecast of low inflation of 4.5% in 2024, which economists do not find creditable.
But on-the-ground things still feel pretty good. Russia’s manufacturing PMI for September was the highest in five years as business is booming, even if exports are down. Russia’s industrial production and retail sales data for August suggest that activity remained fairly solid and Capital Economics thinks the economy is on track for GDP growth of 2.5% this year.
The negative impact of sanctions on trade are also being unwound as companies and traders work out new logistical routes to connect Russia to the international market.
Russia’s goods trade balance still showed a surplus in January-August. In contrast, the services trade deficit doubled due to high growth in tourism imports. While the net capital outflow from Russia continues, it is more modest than last year’s record levels. Capital flight was a serious problem in 2022 when more than $250bn left the country, but the ever vilgilent CBR has been cracking down on the schemes and year to date only $27bn has left the country.
Recent reports show that the war in Ukraine has come to an almost complete standstill, with the much vaunted counteroffensive failing to break through Russia’s defences. Ukraine has taken almost no new territory while Russia has settled into defensive stance and is simply wearing the Armed Forces of Ukraine (AFU) down.
While the Kremlin pays lip service to the possibility of peace talks, analysts widely agree that the Kremlin will wait for the results of the US presidential elections in November next year before the possibility of talks becomes real again.
8 RUSSIA Country Report October 2023 www.intellinews.com