VAT hike in Russia expected to have main impact in Jan

YEKATERINBURG. Nov 14 (Interfax) - The main effect of Russia's planned value-added tax increase on inflation will manifest itself in January 2026, the advisor to the governor of the Central Bank of Russia (CBR), Kirill Tremasov told reporters during a communication session with representatives of regional businesses in Yekaterinburg on Friday.

"This forecast, these estimates are very up-to-date, so there is no reason for us to revise the forecast at this point. [...] We expect the main effect from the VAT increase in January, and estimate the deviation from our [inflation] forecast this year as small," Tremasov said.

The CBR estimates the anticipated VAT hike will contribute up to 0.8 percentage points to inflation. The previous VAT increase in 2019 contributed an estimated 0.6-0.7 pp to inflation.

The medium-term macroeconomic forecast indicates that the CBR's key interest rate could be cut by 50 basis points or remain unchanged at 16.5%, Tremasov said. If there are "any pro-inflationary shocks," the dynamic of the rate could deviate from the forecast, he added.

"But in any case we will conduct monetary policy in such a way as to restore price stability and return to 4%," he said.

The CBR does not expect double-digit inflation, he said. "No, it's net expected, [...] We said that we will probably see the main effect from the VAT increase in January, Tremasov said.

He also said that the CBR expects GDP growth to be "close to zero, either slightly higher or slightly lower."

"If you look at the dynamic of GDP, there was a sudden jump in the fourth quarter of last year. A very high base formed in the fourth quarter [of 2024]. Therefore, yes, one can't rule out that the fourth quarter of this year will be slightly in negative territory compared to the fourth quarter of last year. But one also can't rule out a small gain," Tremasov said.

"Today there will be preliminary data on GDP for the third quarter. And after these figures it will already be possible to answer more definitively whether we will be in a small minus or in a small plus in the fourth quarter. Our forecast is close to zero, either slightly higher or slightly lower," Tremasov said.

It was reported earlier that the CBR expected GDP growth to be in the range of negative 0.5% to plus 0.5% in the fourth quarter of 2025.