The Central Bank presented three scenarios for the development of the Russian economy until 2026
The Central Bank (CB) presented three scenarios for the development of the Russian economy until 2025 inclusive – “basic”, “accelerated adaptation” and “global crisis”. About it reported on the regulator’s website.
The base scenario assumes an increase in interest rates by leading central banks, a slowdown in global economic growth (but not its entry into recession), continued geopolitical tension until 2026, and continued restructuring of the Russian economy against the backdrop of international sanctions. In this situation, inflation in the country, according to the Central Bank’s expectations, will be 5-7 percent by the end of 2023, and in 2024-2025 it will drop to the target 4 percent. At the same time, Russia’s GDP growth rate in the next few years will be 1.5-2.5 percent. The average key rate, in turn, will be at levels of 6.5-8.5 percent (in 2023), 6-7 percent (in 2024), and by the end of 2025 it will drop to 5-6 percent.
The accelerated adaptation scenario implies the rapid establishment of trade relations between domestic companies and foreign partners, a more rapid restoration of imports by building efficient supply chains, as well as an increase in domestic demand. As Central Bank analysts expect, in this case, the annual inflation rate by the end of 2023 will be 3.5-5.5 percent, and in 2024-2025 will return to the target level of 4 percent. The GDP growth rate in the next few years will be 2-3.5 percent (in 2024 – 2.5-3.5 percent, in 2025 – 2-3 percent). The average key rate, in turn, will be at levels of 5.5-7.5 percent (in 2023), and in the next few years it will drop to 5-6 percent.
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The “global crisis” scenario is the most negative for the Russian economy. It implies increased fragmentation in global financial and trade relations, a sharp tightening of monetary policy (MCP) of leading central banks, developed countries entering a state of recession, as well as a noticeable complication of conditions for successful structural restructuring of the Russian economy.
In this situation, as the Central Bank believes, inflation in Russia will reach 13-16 percent by the end of 2023, in 2024 it will drop to 8-9 percent, and in 2025 it will return to the target four percent. In addition, in this case, the country’s GDP will decrease by 5-8 percent by the end of 2023, by the end of 2024 it will fall by another 1-2 percent, and in 2025 it will grow by a maximum of one percent. The average key rate, in turn, will be at levels of 11.5-13.5 percent (in 2023), 12-13 percent (in 2024) and 6-7 percent (in 2025) .
On October 27, following a meeting, the board of directors of the Central Bank raised the key rate by two percentage points at once – from 13 to 15 percent per annum. The regulator explained the decision by the need to combat the recently accelerated rate of growth in consumer prices in the country. Since July 2023, the key rate has doubled – in the first half of the year the figure remained at 7.5 percent per annum. At the same time, the head of the Central Bank, Elvira Nabiullina, allowed a further increase in the rate if the regulator does not see “signs of a sustainable slowdown” in inflation.
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