21 Sep 2021 19:01

Monetary tightening to curb GDP growth in 2022, this expected at 3% per year in 2022-24

MOSCOW. Sept 21 (Interfax) - The Economic Development Ministry expects Russian GDP to grow at the level of 4.2% in 2021 and 3.0% per year in 2022-2024; the monetary tightening that has occurred will limit economic growth next year, Economic Development Minister Maxim Reshetnikov said, presenting the medium-term forecast at a meeting of the Russian government.

"As regards economic growth, we have raised the estimate for GDP growth for the current year to 4.2%. In 2022, two factors will influence the rate of GDP growth: there will be the influence on growth from increased oil production as the OPEC+ deal ends, while tightening of the monetary policy will limit economic growth. We expect GDP growth at the level of 3% in the coming years," Reshetnikov said.

He said the forecast for the price of Urals crude had been updated and would be $66 per barrel this year, then decline to $55 by 2024.

Growth of real disposable incomes of the population is expected at the level of 3% this year and an average of 2.5% per year in the following years.

"The tendency in the economy has allowed us to improve the estimate for this year and the medium-term forecast - both compared to the April scenario conditions and compared to the July update of the forecast, which we made for regions this year for the first time," Reshetnikov said.

He said the economy had recovered a quarter of a year earlier than assumed in the national plan approved last fall - in Q2 instead of Q3.

Reshetnikov pointed toward a positive trend on the labor market: in July, the level of unemployment and the number of citizens employed practically returned to pre-Covid levels.

The Economic Development Ministry expects inflation at the level of 5.8% in annual terms as of the end of December. Reshetnikov said this forecast was a little above the minimum level of the Bank of Russia's baseline scenario of 5.7-6.2% and based on the prerequisites of a stable ruble, continued seasonal reduction of fruit and vegetable prices following a decent harvest, stability of gasoline prices, and effective work of the damper mechanisms launched this year. "At the same time, external risks for this year's forecast persist - the growth of international food prices that resumed in late August and higher global inflation," he said.

According to him, "it is very important for the fiscal policy to remain neutral amid tightening of the monetary policy," among other things, so that non-oil and gas revenues from the budget go back into the economy in the form of social payments, construction, and scientific and technological developments. "For this, it is important that procedures are efficient and spending is rhythmical and uniform, in order to increase the 'turnover' of budget funds and reduce the leftover balance," Reshetnikov said.

"We have formed a realistic, but challenging forecast. We will attain 3% growth given implementation of all the planned government policy measures aimed at achieving target priorities -activities of state programs, national projects, and strategic initiatives. The crucial point is acceleration of investment, including through investment of National Wealth Fund resources," he said.