Russia's Central Bank predicts economy will grow at 'recovery pace' from mid-2023

The Russian economy will continue to shrink until mid-2023, the central bank report on monetary policy has said. The Russian Central Bank has said that the economy of Russia will increase at a recovery pace from the middle of 2023 and in 2024, according to ANI. The Bank of Russia has predicted that the GDP will contract by 4-6% by the end of 2022, which it stressed is "somewhat better" than April estimates where it was predicted that the GDP will contract by 8-10%. 

The Russian Central Bank has said, "In annualized terms, the reduction will continue until mid-2023, therefore, by the end of 2023, a decline in the range of 1-4 per cent is predicted." According to the bank, the economy will start growing at a "recovery pace" between mid-2023 and 2024. In the monetary policy report, the bank noted that the decline in economic activity is taking place more slowly than expected in April.

"Starting from mid-2023 and in 2024, the economy will grow at a recovery pace, somewhat less than estimated in April (1.5-2.5 per cent instead of 2.5-3.5 per cent)," the Bank of Russia said as per ANI. 

Inflation continues to drop continuously for nine weeks 

In the monetary policy report, the Russian bank said that the prices continue to decrease continuously for nine weeks and the slowdown in annual inflation is caused by temporary factors like price adjustments and a stronger ruble. The report revealed that the inflation expectations of households and businesses continue to lower and it is predicted that inflation will drop to 12-15%. The Bank of Russia in its latest report stated that the interest rates in the credit and deposit market, as well as short and medium-term OFZ yields continue to drop.

Lending activity witnesses slight increase: Bank of Russia 

According to the report, the lending activity has slightly increased in Russia. At the same time, the portion of current accounts, being the most liquid part of savings, is increasing in the structure of households’ savings with banks. The bank noted that the future key rate path will be based on the balance of risks for achieving the inflation target level in 2024. The Bank of Russia expects the annual average key rate will be 10.5-10.8% per annum, 6.5-8.5% per annum in 2023, and 6.0-7.0% per annum in 2024. It is worth mentioning here that following the Russian invasion of Ukraine, many companies have announced exit or temporarily suspended operations in Russia. Furthermore, US and EU nations have announced sanctions on Russia for launching aggression in Ukraine. 

Inputs from ANI

Image: AP