The Chairman of the Central Bank saw the risks of state management of the economy during the crisis

The Russian economy is recovering at an accelerated pace, but excessive intervention by the authorities could stifle private initiative, said Bank of Russia Governor Elvira Nabiullina. “We have no risk of underestimating the role of the state in the economy, there is a risk of underestimating private business,” she said during a session at SPIEF.

Now, according to Nabiullina, Russian enterprises have adapted very quickly. “There is a risk that we confuse the activity of the state in a crisis, which should be, with the fact that we want to constantly manage the economy. And this temptation to manage the structural transformation of the economy [может привести] to the fact that we will suppress private initiative, I’m not talking about the risks of a planned economy,” she said.

Structural transformation, according to Nabiullina, “is definitely not about making a big breakthrough in a wide range of industries through budget spending.” Ultimately, this can lead to unavailability of credit and high inflation.

Decisions on investment and development should be made by private business, Nabiullina pointed out: the task of the state is to create conditions for this. In the case of “budget injections”, it will be “much more efficient for businesses to dine and receive benefits” than to increase their competitiveness and productivity, the chairman of the Central Bank concluded.

In 2022, the Bank of Russia described several scenarios for the development of the situation in the Russian and global economies for 2023–2025. Among them is the “accelerated adaptation” scenario, which implies a faster transformation of the Russian economy. All this is realized due to a faster recovery of domestic demand and imports.

In April, the Bank of Russia improved the latest forecast for inflation and the rate of recovery of the Russian economy in 2023. The Central Bank expects GDP growth by 0.5–2%, although back in February it expected a decline. The upper estimate of the range is even more positive than that of the Ministry of Economic Development, which predicts GDP growth at the end of the year by 1.2%. The improvement in the GDP forecast is due to the fact that economic activity is growing faster than the regulator’s expectations. This reflects both an increase in domestic demand and the ongoing processes of adaptation of the Russian economy, Nabiullina explained earlier. The Central Bank predicts that by the end of next year, economic growth rates will return to the levels of the end of 2021 at 0.5-2.5%, and in 2025 – at 1.5-2.5%. Presidential aide Maxim Oreshkin estimated economic growth in 2023 at 1-2%. The Bank of Russia also expects inflation to be lower than expected in February – at the level of 4.5–6.5% against 5–7%. The Ministry of Economy predicts price growth at the level of 5.3%.