Fell, woke up – growth – Kommersant

The Bank of Russia in its report on monetary policy gave a fairly detailed forecast of the main movements in the macroeconomics for the coming quarters. The “momentum” of economic change created in the spring of 2022 is expected to run out in 2024. In 2022, the basis of economic growth was industrial capacity utilization, which is now at a record high. In 2023, it is consumer demand. In 2024, growth will be supported by the investments made in the previous two years, which are actively being made now. The picture of economic adaptation expected by the Central Bank is far from both the expectations of serious problems and optimism: the forced restructuring of the economy costs money, these losses in welfare are visible in the figures of the Bank of Russia.

The quarterly report on monetary policy published by the Bank of Russia is a detailed commentary on the logic of the decision of the Board of Directors of the Central Bank of April 28: the Central Bank analysts made the last calculations to it the day before, on April 27, the text contains only separate May comments on recent events in the economy, did not affect the calculations. Nevertheless, the meaning of the Central Bank’s report is somewhat broader: the revision of the baseline forecast at the end of April is described by economists of the Bank of Russia in detail, the explanations for the first time give their detailed point of view on how the current state of the economy’s adaptation to changes caused by the Russian military operation in Ukraine looks in their eyes , to the G7 sanctions pressure on the Russian Federation in this regard, and to the long-term consequences of the logistical and foreign trade shocks of 2021-2022. In the previous version, in February 2023, the Bank of Russia did not have sufficient data for such forecasting. This, we recall, was the peak of expectations for a decrease in the main export of the Russian Federation, oil and gas, and a period of local weakening of the ruble.

The only fundamentally new figure in the report was the assessment by economists of the Central Bank of GDP dynamics in the second quarter of 2023 – the Bank of Russia estimates it at 4.2% growth year-on-year after a decline of 2.3% in the first quarter of 2023.

This is a typical “base effect” after the peak fall a year ago, from the forecast of the Central Bank it follows that with a high probability the dynamics of GDP will stabilize at a low (two percent) quarterly growth until 2025. Due to the same base effect in 2023, quarterly GDP dynamics figures will slightly decrease by the end of the year, and in the last quarter of the year, the Central Bank allows even a slight (by 0.5%) decline in GDP, which, however, is difficult for anyone to feel. The Central Bank’s inflation for this quarter is projected at 3.6%, and by the end of 2023 it will slowly increase to 4.5–6.5% in the fourth quarter, and will stabilize in 2024.

At the same time, the Bank of Russia also explains the reasons why it adjusted the expected dynamics of macro indicators in the forecast. Since the beginning of 2023, business activity has grown in a wider range of industries than might have been expected. The Russian economy is being rebuilt faster than expected, and the impact of this restructuring on the rate of price growth has decreased – along with the harvest, this has turned the Central Bank into slightly overestimated expectations of inflation dynamics. All negative factors for GDP dynamics, the impact of which is usually exaggerated in alternative forecasts, were taken into account by the Bank of Russia: for example, oil and gas export forecasts were lowered, import forecasts were raised, a short-term improvement in global economic forecasts for 2023 and a slight deterioration in forecasts for 2024–2025 were taken into account. The Bank of Russia is also confident that growth rates during the restructuring of the economy are significantly lower than they would be under normal conditions – this is the price of forced restructuring.

But, apparently, the main change in the Central Bank’s estimates is a change in the sign in the dynamics of investments in 2023: back in February, the Bank of Russia was expecting their reduction, but now – growth.

In this light, it is interesting to explain the stronger than previously assumed (Rosstat revised this indicator) industrial dynamics in 2022: the regulator’s economists state that after some instability in 2020–2022, the level of capacity utilization in 2023 reached a record level of 80.2 %, this is the absolute maximum for the entire history of observations. The occupancy has been on the rise since 2017 from less than 73% and has fallen below 71% for a short time in 2020. In practice, taking into account the problems with taking into account the capacities in the Russian Federation, this load is apparently not far from the theoretically possible. The effect was provided by increased demand, which could not be met by imports due to sanctions and payment restrictions. The Central Bank also provides a decomposition of the inflationary deviation from its own forecast: in total it is 7.7 percentage points (p.p.), of which only 1.6 p.p. is the contribution of the anti-crisis measures of the Central Bank and the government, 0.6 p.p. changes in the global economy, the propensity of the population to save in 2022 reduced inflation by 1.9 p.p., expensive oil – by another 0.6 p.p., strengthening of the exchange rate – 0.2 p.p.

Growth in 2024 may already be the result of investment activity in 2022-2023, sponsored by the federal budget. It should be noted that in the forecast for liquidity factors at the end of the year, despite imbalances in budget expenditures and revenues in the winter-spring of 2023, the Bank of Russia expects a structural liquidity surplus in the banking system at the level of 2.5-3.1 trillion rubles. and balances on the accounts of the extended government in the Central Bank of 2.8-3 trillion rubles. Now, according to the Central Bank, investment activity is at the level of 2021 and slightly higher than in 2018-2019. Industries where it is concentrated – construction, processing, agro-industrial complex, retail and water supply, investments – are largely forced, private sector investments will remain at the level of 2022 until 2024 and will make a negative contribution to GDP growth, it will be restrained by both exports and declining demand. The costly adjustment to the new environment will end largely in 2025, when both investment and growth stabilize.

Dmitry Butrin