Russian companies optimizing investment projects, borrowing, signs of cooling in number of sectors - Nabiullina

MOSCOW. Dec 20 (Interfax) - The situation in the Russian economy is gradually changing, with companies optimizing their investment programs and borrowing plans, and there are signs of cooling in a number of sectors, Central Bank Governor Elvira Nabiullina said at a briefing following the meeting of the CBR's board of directors at which it was decided to maintain the key rate at 21%.

"In October and November 2024, economic activity remained high, propped up by growing domestic demand, including household consumption. This was largely the result of the accumulated effects of the fiscal stimulus, high credit activity over previous months, and increased household incomes," Nabiullina said.

"High-frequency indicators suggest that the situation is gradually changing. Specifically, companies are setting more moderate targets for output, postponing or more carefully selecting investment projects, and reducing their borrowing plans for the next year," she said.

"As reported by the Bank of Russia's regional branches, there are signs of cooling in construction, coal production, and metallurgy," she said.

"Furthermore, there is a number of enterprises that have reduced the demand for labor," she said.

"As a result, we observe a more active reallocation of workers from some industries to others that are still experiencing considerable staff shortages. This process is alleviating the pressure on the labor market," she said.

Demand cooled to some extent as the result of measures previously taken by the regulator, and this enabled the decision not to raise the rate in December, Finance Minister Anton Siluanov said, commenting on the board meeting.

"The Central Bank didn't simply put the rate up [at the three previous meetings]. The idea was to cool demand a little, which would affect inflation. Now it is clear that demand is cooling, the pace of consumer lending was already declining, and now we see that corporate lending is also slowing. This is a signal for the Central Bank that the measures worked. And the Central Bank did not opt to tighten monetary policy. This is, in fact, is what today's decision was about," Siluanov told journalists.