Overheating of Russian economy peaked in Q4, GDP grew 2% in Q1- Central Bank
MOSCOW. May 12 (Interfax) - The Russian economy grew 2% year-on-year in Q1 2025 after rising 4.5% in Q4 2024, the Central Bank said on Monday in a commentary to its medium-term forecast, published on April 25.
The regulator expects year-on-year growth of 1.9% in Q2, slowing further to 0.0%-1.0% in Q4 2025.
In the summary of the key rate discussion, also published on Monday, the Central Bank said the overheating of the Russian economy peaked in Q4 2024.
"We can say with a greater degree of confidence that economic overheating peaked in Q4 2024, and the positive output gap began to narrow in Q1 2025 as borne out by a decrease in current inflationary pressure, a gradual cooling of domestic demand and signs of some easing of tightness in the labor market. In addition, this conclusion can be drawn from output gap estimates taking into account updated GDP data for 2024, preliminary data and survey data obtained in Q1 2025. At the same time, the economy remains significantly overheated. A categorical conclusion about the sustainability and speed of its cooling can be made later," the summary says.
"GDP growth in Q4 was significantly higher than the Bank of Russia estimate [of 3.3%] in the February forecast, amounting to 4.5% compared to the same period of the previous year [according to Federal Statistics Service data]. Thus, the Russian economy's deviation upward from the trajectory of balanced growth at the end of 2024 was more significant than previously believed," the Central Bank said in the forecast commentary.
"The Bank of Russia estimates that, in light of the latest data for January-March, the rate of GDP growth in Q1 slowed to 2.0% compared to the same period last year, including under the influence of the growing effects of tight monetary conditions. The slowdown of economic activity will continue in Q2 2025, which will lead to the contraction of the positive output gap. The rate of GDP growth will slow to 1.0%-2.0% in 2025 [from 4.3% in 2024] and to 0.5%-1.5% in 2026," the Central Bank said.
"The share of investment in GDP will remain at the high level reached in 2023-2024. Consumer demand's contribution to the dynamic of GDP in 2026-2027 will grow as interest rates decrease and the economy returns to the trajectory of balanced growth. In the baseline scenario it is expected that the Russian economy will reach potential growth rates of 1.5%-2.5% in 2027," the Central Bank said.
The Economic Development Ministry estimated earlier that GDP grew by 1.7% in Q1 2025, or by 2.3% after adjustment for the calendar factor, meaning the extra day in Q1 of leap year 2024.
The ministry's baseline forecast, updated in April, sees GDP growing by 2.5% in 2025, the same as the previous version of the forecast released last September. Analysts polled by Interfax in early April forecast that GDP will grow by 1.6% this year.
