Differing Economic Development Ministry and CBR 2025-2027 growth forecasts due to alternative assessments of potential growth - deputy minister
MOSCOW. Oct 31 (Interfax) - The Economic Development Ministry and the Central Bank of Russia have differing forecasts for the most likely scenarios for the Russian economy's growth over the next three years due to alternative assessments of potential growth, with the ministry's forecast 1.5%-2% higher, Deputy Economic Development Minister Polina Kryuchkova said at a joint meeting of the State Duma's Financial Market, Budget and Tax and Economic Policy Committees.
As reported, the Economic Development Ministry and Central Bank's forecasts for the Russian economy's growth over the next three years differ significantly in their baseline scenarios. The ministry forecasts GDP growth of 2.5% in 2025, 2.6% in 2026 and 2.8% in 2027. The CBR's baseline scenario predicts the economy will grow 0.5%-1.5% in 2025, 1.0%-2.0% in 2026 and 1.5%-2.5% in 2027.
"Regarding the comparison between the Bank of Russia and the government's forecasts. The bank's disinflationary scenario is essentially very close to the government's baseline scenario. It really comes down to probabilities. We believe the likelihood of this scenario is higher. The Bank of Russia thinks this scenario is plausible and realistic, but sees another scenario as more likely. We also have a conservative scenario, which lies somewhere between the Bank of Russia's inflationary and crisis scenarios, although we also consider it unlikely," Kryuchkova said regarding the discrepancies in the government and the bank's choice of baseline scenarios.
"These probabilities depends on a complex issue - evaluating the relationship between the Russian economy's potential for growth and what might be considered overheating, based on the balance between potential supply and potential demand. In our view, the economy's growth potential really is a little higher. According to our estimate, potential growth is not 1.5%-2%, but higher than this," she said when commenting on the estimates of the Russian economy's potential growth.
"Investments have grown very fast in the past few years, and they should give a return in some way or another. Statistics show that there is sufficiently healthy growth in investments. Initially, the main increase was in buildings and structures, then it shifted towards machines and equipment, material assets. Another point is the growth of labor productivity. Businesses now have strong incentives to increase productivity [amid staff shortages], and the reserves here are big. So we believe that potential development over the long-term could be higher," she said, explaining the ministry's higher growth forecast.
Another important issue under discussion is "the impact of monetary policy on the supply side, taking into account the current structure of the Russian economy," Kryuchkova said.
"The impact on demand is well-studied and clear, but the impact on supply is more complex. In highly competitive sectors, the effect is undoubtedly healthy, as it stimulates competition. However, the question lies in the impact on the supply side in monopolized sectors, and we understand that, for objective reasons, the level of competition has somewhat decreased over the past two years. Does this mean that the approach to monetary policy should change? Probably not. Instead, it highlights the need to develop competition in the relevant sectors, which is a challenging joint task for the government and the Bank of Russia," she said.