7 Jul 2022 14:28

Situation in Russian economy turning out better than expected - minister

MOSCOW. July 7 (Interfax) - The situation in the Russian economy is turning out better than initial expectations, the consumer market situation has improved and imports have grown slightly, while weak demand remains the main risk for recovery, Economic Development Minister Maxim Reshetnikov said.

"On the whole, the economic situation is turning out better than initially thought," he said at a meeting of the Volga Federal District Council, chaired by Russian Presidential Envoy to the Volga Federal District Igor Komarov.

"The consumer market situation has improved. In the last week of June, POS turnover returned to February levels for the first time. But it's too soon to talk about stabilization - in real terms, POS turnover is falling behind, and the June growth was mainly due to the seasonal factor in tourism, hotel business, and transport. Vacations, and summer holidays for children have begun," Reshetnikov said.

As for imports, he said "the situation has slightly improved due to the measures taken to support imports, but volumes are still at low levels." Reshetnikov said that consumer imports are recovering more quickly, while the situation for interim or investment goods was more difficult, and "that's the main problem."

"The main risk for economic recovery remains - it is weak demand. This is confirmed by the deflationary trend in the economy and the slowdown in lending. The loan portfolio of individuals is not growing, and for companies it has increased mainly due to preferential loan programs. At the same time, deposits are growing -households and companies are reluctant to spend money amid high real rates, they prefer savings," Reshetnikov said.

"Structural transformation processes in the economy are taking place against this backdrop. There are problems in production. Dynamics vary from a 66% decline in the automotive industry, and 11% decline in timber processing, but there is growth in pharmaceuticals and electronics," he said.

"Separately, I'll mention unemployment, which has fallen to [an all-time low of] 3.9%. But the situation still worries us, despite such historical lows. A number of enterprises, faced with such a transformation of the economy, are now in a difficult position, primarily the automotive industry. We need to constantly monitor the situation and take measures," Reshetnikov said.

"But the chief constraint is still weak demand. So the government's main priority is to create demand in the economy, above all increasing the pace of lending with preferential programs," he said.