Economic Development Ministry sees risks of overcooling in Russian economy, expects timely monetary policy decisions from CBR - minister

MOSCOW. May 26 (Interfax) - The current situation points to risks of overcooling in the Russian economy, while inflation is slowing down, which is why timely decisions by the Central Bank of Russia on monetary policy are important, Economic Development Minister Maxim Reshetnikov said during a meeting of the State Duma Committee on Budget and Taxes.

The current inflation forecast for Russia in 2025 at 7.6% is realistic, but mostly reflects the accumulated potential from the end of 2024 and the beginning of 2025, he said.

"We have reflected the accumulated inflationary potential that formed in the fourth quarter and at the beginning of this year, which allows us to assess the current forecast [for inflation in 2025 at 7.6%] as realistic," he said.

"The current level of inflation - we see that in recent weeks inflation fits within the 3%-4% range if weekly data is annualized. On the other hand, weekly data is still calculated for a limited set of goods. We are waiting for the results of May, but recently weekly data has not differed much from monthly data. We expect May data to confirm this trend," he said.

"We expect this to be taken into account by the Central Bank in a timely manner when making decisions," he said.

"Because we also see risks of overcooling in the economy in the current conditions," he said.

As reported, according to Rosstat data, inflation in Russia amounted to 0.07% from May 13 to 19, 2025, after 0.06% from May 6 to 12 and 0.03% from April 29 to May 5.

Since the beginning of the month, the price increase by May 19 totaled 0.15%, and it is 3.27% since the beginning of the year.

From the data for 19 days of May this year and the average daily data for May 2024 (in May 2024, monthly inflation amounted to 0.74%, significantly exceeding the weekly dynamics, which indicated a growth of 0.5%-0.6%, so it is appropriate to use average daily data for the full month as a comparison base), it follows that annual inflation in Russia as of May 19 slowed to 9.9% from 10.0% on May 12 (after 10.23% at the end of April).

In a commentary on its forecast, the Central Bank said that it expects annual inflation in Russia to slow to 10.1% by the end of June, meaning that annual inflation is decelerating slightly faster than the CBR's expectations. At the same time, inflation expectations of Russian households in May rose to 13.4% from 13.1% in April, according to a brief survey by inFOM conducted at the Central Bank's request.

At the end of April, the Economic Development Ministry raised its inflation forecast for 2025 to 7.6% from 4.5% in the September version, while keeping the forecast for 2026 unchanged at 4.0%.

The consensus forecast of economists polled by Interfax in early May for inflation in 2025 stands at 7.1% (unchanged from the April survey), and 4.8% for inflation in 2026 (down from 4.9%).

According to Rosstat data, Russia's GDP in Q1 2025 increased 1.4% compared to Q1 2024.

Rosstat's data came in below the estimate from the Economic Development Ministry (1.7%), the CBR's estimate (2.0%) and analysts' expectations (Interfax's early April consensus forecast expected Q1 growth of 2.2%).

As reported, the Economic Development Ministry estimated Russia's GDP growth in Q1 2025 at 1.7% year-on-year. Adjusted for the calendar factor (there was one extra day in Q1 2024 due to the leap year), the ministry assessed GDP growth during the quarter at 2.3%.

In its baseline scenario, the Economic Development Ministry forecasts Russia's GDP growth in 2025 at 2.5%. The ministry maintained this forecast in April from its September version.

The Central Bank's forecast for 2025 is more conservative, at 1%-2%.

Analysts polled by Interfax in early May forecast GDP growth in 2025 at 1.6%.

President Vladimir Putin has repeatedly said that 2025 will be a "soft landing" for the Russian economy. The year 2025 will be a year of "managed cooling," during which the government and the Central Bank will seek a balance between reducing inflation and gradually returning it to target while simultaneously preventing the economy from sliding into recession or stagflation, Deputy Prime Minister Alexander Novak said.