27 Apr 2022 15:09

Russian inflation to be 20.7% in 2022 under baseline forecast, GDP to contract 8.8% - Kudrin

ST. PETERSBURG. April 27 (Interfax) - Russia's GDP is expected to contract by 8.8% in 2022 according to the Economic Development Ministry's baseline forecast, and by 12.4% according to the conservative outlook; and inflation is estimated at 20.7% under the baseline scenario for the year, and it could exceed 6% in 2023, Alexei Kudrin, head of the Accounts Chamber, said on Wednesday during a meeting of the Council of Legislators.

"The economy is currently experiencing a difficult period. It is expected that its fall this year, according to the preliminary, yet discussed forecasts of the Economic Development Ministry, will be 8.8%; and according to a more conservative scenario, 12.4%. Even if we fall between them - which is very complex, and the uncertainties are very large - then this is more of a crisis than the crisis of 2009 [when Russia's GDP contracted 7.8%]; and more than the pandemic crisis [when 2020 GDP contracted 2.7%]," Kudrin noted.

"Today, all of us should to feel that we have reached a new low mark. At the end of the year, and next year, that is, for about one-and-a-half to two years, we will live in a very difficult situation. Therefore, it is very important to evaluate our strengths and resources," Kudrin stressed.

"According to preliminary estimates, inflation this year will be 20.7% according to the baseline forecast; and it will be considerable next year at more than 6%," Kudrin said when announcing the preliminary figures for the baseline version of the Economic Development Ministry's forecast.

With such inflation, "we must immediately assess our goals in social policy - what to index, what will be indexed ahead of schedule, or maybe delayed - and how to distribute resources for this purpose," the Accounts Chamber head said.

Kudrin said that the preliminary estimates of additional expenses included in the government's plan for this year are over 4 trillion rubles for all anti-crisis policy tasks as well as support for people and businesses.

At the same time, he said that this is not just a matter of anti-crisis policy - "we are essentially moving into a period of structural solutions and changing the model of government, sometimes in a forced way" in terms of the entire financial system, the economy, and regulation.

"I want to remind you that the government essentially made one strategic decision - this year we abandoned the fiscal rule. That means that all of the oil and gas revenues that will be generated that would have gone into the NWF before will be spent. If we proceed from the base forecast, 6.3 trillion rubles will be spent on economic support. And the National Welfare Fund will be used to repay debts due to restrictions on borrowing. I can assure you that these 6 trillion rubles is the minimum necessary to meet the challenges that we now face," Kudrin also said.

Kudrin noted that the government's forecast figures are now very important for decision-making. "The publication of the forecast has been delayed so far, but in reality, these figures are beyond important at the moment," he said.