Decline in Russian GDP in 2022 to be closer to 4% in current forecast of 4%-6% - Central Bank

MOSCOW. Sept 16 (Interfax) - Data on Russia's GDP in the second quarter and current indicators show that business activity in Russia is better than the Russian Central Bank had expected in July, and the reduction in GDP in 2022 will be closer to 4% in the current forecast of 4%-6%, the Central Bank said in a statement published following the meeting of the board of directors, at which the key rate was lowered to 7.5% from 8%.

"The external environment for the Russian economy remains challenging and significantly constrains economic activity. Concurrently, Q2 GDP and high-frequency indicators point to stronger dynamics of business activity than the Bank of Russia expected in July," the statement said.

"According to the Bank of Russia, with regard to the current situation in the Russian and global economies, the decline in GDP in 2022 may be closer to the upper bound of the July forecast range (-6.0)-(-4.0)%," it said.

Commenting on economic activity, the CBR said that, "At the same time, trends across sectors and regions remain clearly mixed."

"Supply and demand factors are both rendering a certain negative impact on economic activity. Surveys suggest that a significant proportion of enterprises still confront difficulties in production and logistics. However, their sentiment is continuing to improve as suppliers of finished products, raw materials, and components diversify, as do sales markets. A growing number of enterprises are adjusting to the new environment," according to the press release.

"For all the recovery, consumer activity remains tepid owing to the recent drop in households' real incomes, as the population maintains its propensity to save. Specifically, beyond overall economic uncertainty, the demand factor results from reduced supply of several types of goods and services. That said, supply-side constraints on consumer markets have slightly faded, as consumer imports are gradually recovering and import substitution is taking place," the regulator said when commenting on the situation regarding supply and demand.

"The situation in the labor market remains stable in general. Although the number of vacancies has decreased, the unemployment rate is near historical lows. The adaptation of the labor market to the changed conditions largely occurs through the mechanism of part-time employment and the adjustment of real wages," the CBR said.