Early spring is in the forecasts – Newspaper Kommersant No. 28 (7473) dated 02/15/2023

Assumptions that the current economic forecasts for 2023 and subsequent years, apparently, will have to be improved, are confirmed by the data of the Central Bank on January monetary conditions: they are neutral and will become soft with a further decline in inflation, without new shocks, a significant increase in corporate lending will apparently continue and money supply. A correction of the forecast for a (possibly) cyclical growth spurt was carefully discussed yesterday at a meeting with the Prime Minister – the Ministry of Economy will prepare new scenario conditions in the economy until 2025 by April, for the start of a new budget cycle.

Yesterday’s discussion with Mikhail Mishustin of the preparation of new parameters for the forecast of socio-economic development until 2025 was cautious, but optimistic – following the results of a meeting in the government with the participation of the leadership of the Central Bank and the presidential administration, no figures were announced, however, the Bank of Russia last Friday published its revised macro forecast until 2025 of the year. The topics of yesterday’s discussion, according to the Prime Minister, are infrastructure projects, including regional ones financed at a faster rate, and treasury loans to the regions against future interbudgetary transfers.

Changes (which will not lead to an adjustment of the parameters of the federal budget, but will affect its execution within the 2023-2025 three-year period) are expected to be quite large, since one of the topics of the meeting in the government was possible adjustments to the budget forecast for 2023-2025, adopted at the end of 2022- th in the budget package. In fact, all this does not introduce any serious changes in the course of the work of the White House: the Ministry of Economy yesterday confirmed that the current macro forecast for 2023 (the version of September 2022 assumes a decrease in Russia’s GDP this year by 0.8%, as part of the new macro forecast of the Central Bank it corresponds to stagnation plus or minus 1% of GDP) will be adjusted by April, the new forecast has reason to be better due to the good results of the last quarter of 2022. It should be noted, however, that in April the first version of the scenario conditions for the forecast will just be very appropriate – in terms of timing, this is the standard start of the budget preparation cycle for 2024–2026.

An illustration of how successful (adjusted for current conditions) the end of 2022-beginning of 2023 was for the Russian economy was presented yesterday by the Bank of Russia in the review “Monetary conditions (MCT) and the transmission mechanism of the monetary policy”. The Central Bank brought together, for purely technical purposes, previously published estimates on the dynamics of monetary aggregates, lending in different segments, the dynamics of lending rates, on the foreign exchange market and on its own balance sheet, including for January 2023. The situation looks, minus some weakening of the ruble, much better than expected (in December 2022, the real exchange rate of the ruble against a basket of currencies of trading partners decreased by 8.3%, but appreciated by 28.3% over the year, and the weakening of the exchange rate is accompanied by a weakening of the DCT).

Particularly indicative is the continued growth of corporate credit against the backdrop of some weakening in the growth rate of credit to households – in annual terms, it totaled 13.1%, while the portfolio of foreign currency loans decreased by a quarter over the year. In January, lending activity in the corporate segment, however, slightly decreased, the Central Bank allows some tightening of the conditions of these loans – but on the whole it is optimistic, and the regulator’s analysts remain in the logic of a hypothetical “short growth cycle” of 2023-2024 (see “Kommersant” from 11 February). The potential for expansion of retail credit is also considered to remain.

In turn, the dynamics of the money supply in 2022 reflected the growing demands of the banking system on the economy. Nominally, the annual growth in the money supply (M2 aggregate) at the end of the year was 24.4%, in January, according to the Central Bank’s latest data, it accelerated to 26%. In many ways, this is a process of devaluation: the growth rate of the M2X aggregate (money supply including currency) was 12.9% in November 2022, 14% in December, and 14.5% in January 2023. Money market rates fell in January due to liquidity inflow. Of course, January is relatively unreliable as a basis for any forecasts, but in this case, the statistics of the first month are important as a possible confirmation of previous trends – while the good data of February and March will certainly lead to more ambitious fiscal stimulus programs, since loose fiscal policy, combined with neutrality of the monetary policy of the Central Bank – a strategy for 2023, on which the Bank of Russia and the White House seem to have successfully agreed.

Dmitry Butrin