Companies palpably reducing investment programs against backdrop of current monetary policy, this will tell on Russia's economic growth dynamic - Reshetnikov
MOSCOW. Dec 16 (Interfax) - Russian authorities are facing a massive task of passing between inflation and a risk of economic slowdown, enterprises are palpably reducing their investment programs against the backdrop of Central Bank decisions to raise the interest rate, this will tell on the dynamic of economic growth, Russian Economic Development Minister Maksim Reshetnikov told Interfax on the sidelines of a United Russia party congress on Saturday.
"A very complicated task right now is, we need to pass between two problems, the inflation and a risk of economic slowdown," Reshetnikov said, when asked about a likelihood of stagflation in 2025.
"Of course what we now see unfolding at enterprises, they are very seriously reacting to the decisions that were made by our Central Bank [raising the interest rate] and are palpably reducing their investment programs to adapt to current circumstances," Reshetnikov said.
"Of course, this is bound to affect both the current dynamic, it is clear that this will show a little later, and the long-term growth line," he said.
"It is too soon to give [specific quantitative evaluations], we will now look at the dynamic of lending in November-December, how much it slows down," he said.
According to the Federal State Statistics Service (Rosstat), Russia's GDP grew by 4.2% in January-September 2024, including by 5.4% in the first quarter year on year, by 4.1% in the second quarter, and by 3.1% in the third.
The Central Bank's GDP growth forecast for 2024 stands at 3.5-4%; that of the Economic Development Ministry, at 3.9%
But for 2025, the bank's and the ministry's forecasts already differ quite substantially.
In October, the Bank of Russia, having raised the interest rate from 19% to 21%, confirmed its GDP growth forecast for 2025 at just 0.5-1.5%. Most analysts (according to an Interfax poll in early December) believe that, with inflation high, at a meeting of its board of directors on December 20, the Central Bank will continue the cycle of rate increases to 23%, with some experts not even ruling out an increase at once to 25%.
The Economic Development Ministry's official forecast from September that is laid down in the 2025 budget (prepared in a different, milder background for a monetary policy for the end of 2024 and 2025) involves a 2.5% GDP growth rate in 2025, but the current tight monetary policy already makes this forecast look fairly optimistic.
According to prognosis consensus among analysts polled by Interfax in early December, Russia's GDP will grow by 1.5% in 2025.
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