Ministry of Economics admits improvement of a number of macro forecast indicators

The Ministry of Economic Development has begun developing scenario conditions for the forecast of Russia’s socio-economic development until 2026. A number of indicators of the current forecast (prepared in September 2022) can be revised for the better, a representative of the ministry told reporters. The document will be submitted to the government in April, he added.

According to the current forecast, the economy will contract by 0.8% in 2023 and grow by 2.6% in 2024. Inflation at the end of this year is expected at 5.5%, and the government expects it to return to the target of 4% in 2024. Investments in fixed assets will decrease by 1% in 2023, real disposable income will increase by 1.6%, comes from the forecast.

“When preparing the document, we will take into account the positive results of 2022 achieved through the implementation of the Plan of Priority Actions in the Conditions of Sanctions,” the representative of the Ministry of Economic Development noted, adding that the discussion of the parameters will take place with the relevant departments in their competence.

The main factors for economic recovery will be consumer demand and high investment activity, said a representative of the ministry. In particular, the regions have ample opportunities to stimulate investment, the ministry said: “Much will depend on the active use of the mechanism of infrastructure budget loans.”

On February 10, the Bank of Russia updated its medium-term macro forecast, improving estimates for the economy this year. According to the regulator, the dynamics of GDP will be in the range from minus 1% to plus 1% (in the previous version of the forecast, the Central Bank expected a decline of 1-4%). At the same time, the assessment for the next year has been downgraded to 0.5–2.5% compared to 1.5–2.5%.

The Central Bank expects quarterly GDP growth in annual terms to begin in mid-2023, Elvira Nabiullina, head of the regulator, said at a press conference. The economy is actively adapting to the ongoing changes, she noted. The improvement in the forecast for GDP dynamics for this year is associated both with an upward revision of estimates of previous periods, and with more significant budget spending than was taken into account in the October forecast of the Central Bank, Nabiullina explained.

On April 8, First Deputy Prime Minister Andrey Belousov said that the decline in Russia’s GDP by the end of the year would not exceed 1%, but the dynamics could turn out to be positive. Earlier, the International Monetary Fund (IMF) in its January review improved the forecast for the Russian economy in 2023 – from a decline of 2.3%, expected in October, to growth of 0.3%. This assessment turned out to be much more optimistic than the official forecasts of the Russian authorities. “In this sense, the IMF evaluates us even better than we evaluate ourselves,” Belousov noted.

At the end of 2022, Russia’s GDP, according to preliminary estimates, decreased by 2.5%, President Vladimir Putin reported in mid-January. The Bank of Russia also estimates the decline in GDP at 2.5%.

According to Rosstat, in the third quarter of 2022, the Russian economy contracted by 3.7% year-on-year after 4.1% in the second quarter and growing by 3.5% in the first quarter. According to the Ministry of Economic Development for January-November, the decline was 2.1%. Rosstat will publish official GDP statistics for last year on February 17.