What analysts say about the new forecast of the Ministry of Economy

The improved forecast of the Ministry of Economy “removes some of the budget risks and it will be easier for the authorities to meet the initial deficit plan of about 2% of GDP, even if it is likely to be exceeded,” notes Dmitry Polevoy from Lokoinvest. Meanwhile, the current forecasts of the ministry, although higher than the consensus (see “Kommersant” dated April 10), but realistic, analysts say. Recall that in March, FocusEconomics improved the consensus forecast for a recession in the Russian economy in 2023 from 2.2% to 1.8% (the range of forecasts is from minus 7.1% to 1%), and in 2024 the forecast for its growth was worsened from 1 .1% to 1% (range – from minus 6% to plus 3.1%). “The forecast for economic growth for 2023 does not look sky-high, although we still expect more modest dynamics just above 0% due to a more restrained view on the prospects for consumption and especially investment,” notes Mr. Polevoy. “We are more skeptical about the forecast from 2024 – somewhat surprising is the steady growth of GDP above the potential 1-1.5%, high growth in real wages, which is likely to outpace productivity growth, suppressed by sanctions and the inevitable backlog in technology, and exports are hardly worth expecting much support in conditions of slowing global growth”.

The main reason for the more modest forecasts of analysts both for the current year and for 2024 is the worst growth expectations for both consumption and investment. However, they acknowledge that in 2023, household demand will be the main source of support for the economy, including through a temporary acceleration in wages and incomes, which will not allow inflation to fall below 6%.

“The advantages in terms of investment and industry, which is waiting for a decrease in production and oil refining, are doubtful,” economists of the MMI Telegram channel are convinced. They also note that the hypothesis of the ruble strengthening from current levels suggests that it will be possible to solve problems with payment for exports and it is not clear how this can be done. “The forecast for the ruble exchange rate is close to our expectations, assuming a slight increase in the remaining months to an average of 77.6 rubles / $, that is, 6-7% from current levels. In the coming months, we still expect an improvement in the trade balance, which, together with a smaller outflow of capital, will return the ruble to 74–76 rubles / $ in the next three to six months,” Lokoinvest, in turn, believes.

Meanwhile, MMI analysts remind that the current forecast of the Ministry of Economy can be realized only in the absence of new shocks, while in 2022 there were two shocks (February and September), and the hypothesis that this year the Russian Federation will pass smoothly is very bold. However, they remind that the ministry, in their understanding, is not a macro forecast in the academic sense, but a target scenario – this is what the government would like to see, that is, a slight increase.

Artem Chugunov