The Ministry of Energy estimated GDP growth at 2.3% and the dollar exchange rate at 90 rubles in 2024

The government has reached a consensus on the socio-economic development forecast for 2024–2026, two sources close to the Cabinet told Vedomosti. According to them, the key parameters are as follows. GDP growth in 2023 is projected at 2.8%, in 2024 – at 2.3%. Inflation at the end of this year is expected to be 7.5%, next year it will drop to 4.5%. The Ministry of Energy estimates the average annual dollar exchange rate in 2023 at 85 rubles/$ with Brent price $83.5/barrel. The average annual exchange rate in 2024 is projected to be about 90 rubles/$. Brent will cost $85/barrel.

The key forecast factors are the oil exchange rate and price, noted one of Vedomosti’s interlocutors. The Ministry of Energy’s forecast for the ruble cannot be assessed in isolation, but must be considered primarily from the point of view of the ruble price of oil, since these parameters are used mainly in budget projections of oil and gas revenues, noted a source familiar with the preparation of the macro forecast. The price of oil in ruble terms relative to current levels is more than $90/barrel. decreases by more than 15%, while the exchange rate on average strengthens relative to today’s values, he explained. This creates a margin for a budget design that remains stable in the event of both a strengthening of the exchange rate to less than 90 rubles/$ and a decline in oil prices. Another Vedomosti interlocutor, close to the preparation of the macro forecast, emphasized that the forecast for the exchange rate is conservative; in reality, the ruble may be stronger than the forecast value.

Vedomosti sent a request to the Ministry of Economy and the government.

The latest official forecast of the Ministry of Economic Development, published in April, assumed economic growth in 2023 by 1.2%, but in general it is already clear that GDP will increase more significantly. President Vladimir Putin, Prime Minister Mikhail Mishustin, Minister of Economic Development Maxim Reshetnikov and Minister of Finance Anton Siluanov spoke about this. They estimate that the economy should grow by more than 2.5% in 2023.

The indicators that are compiled at the end of the current year determine the basis for the following periods – the budget forecast of income and expenses also depends on this. According to Vedomosti sources, the discussion this year was quite complex, in particular, for a long time it was not possible to agree on estimates for 2023. Disputes took place on almost all key indicators: the Ministry of Finance believed that more conservative estimates should be based on, the Ministry of Energy proposed more positive scenario. However, although the Ministry of Energy assesses the situation more optimistically, its assessments can even be considered quite restrained regarding how the situation is actually developing, clarified another interlocutor familiar with the progress of preparing the forecast. Mishustin, in his speech on Friday, September 8, supported the version of the Ministry of Energy (the department oversees the preparation of the macro forecast. – Vedomosti).

“The economy is adapting to current challenges,” the prime minister stated. In July, in annual terms, GDP grew by 5%, and over seven months the figure grew by 2%, he cited data from the Ministry of Energy. At the end of August, the federal budget was executed with a surplus of about 200 billion rubles, non-oil and gas revenues amounted to 1.82 trillion rubles. (56.5% more than last year), and oil and gas revenues have recovered and since September their trajectory has been significantly ahead of last year’s values, Mishustin said. According to him, this year the government expects to execute the budget with a deficit at the level of the initial forecast of 2% of GDP. Presidential aide Maxim Oreshkin on the sidelines of the Eastern Economic Forum (EEF) said that the deficit could be smaller, and a surplus could even be possible in 2024.

Experts interviewed by Vedomosti consider the Ministry of Energy’s estimates to be generally close to market forecasts, although with a number of reservations. Compared to consensus surveys, the GDP forecast looks more positive for both 2023 and 2024, noted Dmitry Kulikov, director of the sovereign and regional ratings group at ACRA. Inflation at the end of this year, in his opinion, looks more conservative than the market estimates, and the exchange rate and price of oil coincide with analysts’ forecasts. From his point of view, GDP growth in 2024 may be closer to 1%, since there will no longer be a recovery impulse and an increase in consumption rates; in addition, the ability to significantly increase the degree of capacity utilization and labor will be reduced.

In recent months, a negative superposition of two key directions of economic government policy has formed – monetary and fiscal, noted economist, author of the Spydell_finance Telegram channel Pavel Ryabov. The government insists that by the end of the year the budget deficit will be about 2% of GDP, which corresponds to 3 trillion rubles, he recalled. To stay within this amount, given that the deficit accumulated from January to August amounts to 2.4 trillion rubles, the Ministry of Finance will have to reduce expenses by at least 15% at face value from September to December while accelerating revenue receipts, he emphasized. Budget doping, which was implemented from December 2022 to February 2023, created a powerful positive impulse in the economy, but a drawdown is expected from the fourth quarter of this year, Ryabov believes.

In September, a contraction in lending and a decrease in the growth rate of the money supply will begin, the expert explained. Taking into account the economy’s dependence on domestic funding, a strong rise in the cost of debt resources will undermine investment potential, significantly “cooling” the rate of economic growth, Ryabov continued. The intensification of crisis processes is possible if a debt crisis scenario is realized, when over-lending companies in Russia will experience problems servicing debts, but the government is unlikely to allow this, he noted. “Will the economy go into crisis from the end of 2023? We’ll see, but a quarter-on-quarter decline in GDP, excluding seasonal factors, becomes almost inevitable due to too sharp tightening of conditions (rate increases – Vedomosti). There will no longer be rapid growth rates,” Ryabov concluded.

2.3% GDP growth in 2024 is a bit too much, judging by the previous forecast of the Central Bank and the expected tight monetary policy for the coming year, agreed Victor Tunev, an economist and author of the Truevalue Telegram channel. Next year’s budget will receive high oil and gas revenues with the export price of Russian oil around $70/barrel. or higher, i.e. even more than can be spent according to the budget rule, the expert estimated. “But then there will be a choice: buy foreign currency with the surplus or spend it on something more valuable,” Tunev emphasized.

The dollar exchange rate is about 90 rubles/$ – “it’s neither yours nor ours,” the economist sneers. In his opinion, there are no mechanisms or desire to return the exchange rate to 80 rubles/$, but high values ​​cannot be predicted either – this will create additional demand and capital outflow. If you predict an exchange rate of, for example, 95 rubles/$, this will mean that the authorities recognize that the current exchange rate is fundamentally justified, the economist explained. In fact, this is not the case, he emphasized.

In general, similar points of view were expressed by Russian opinion leaders at the EEF. The growth of the Russian economy by the end of 2023 may be in the range of 2–3%, said President and Chairman of the Board of Sberbank German Gref. “It’s difficult to make predictions now. Raising the rate and a number of measures aimed at reducing the availability of credit resources, unfortunately, will make a negative contribution to GDP. The fact that growth will be over 2% is obvious. But it’s hard to predict between 2 and 3% now,” Gref told reporters on the sidelines of the EEF.

Anastasia Boyko contributed to the preparation of this article