Russia's GDP to contract 3.5% in 2022, 2.1% in 2023, inflation to total 12.5%, 6% - Central Bank survey of analysts

MOSCOW. Oct 20 (Interfax) - Inflation in Russia could total 12.5% in 2022 and GDP could contract 3.5%, according to analysts surveyed by the Central Bank of Russia (CBR) in a monthly poll held between October 12 and October 18.

Compared with September's survey, the forecast for decline in GDP in 2022 is better, having been projected at 4.2% in September, as is the forecast for inflation, previously forecast at 12.9% in 2022.

The forecast for the dynamics of GDP in 2023 has been somewhat downgraded, with analysts now expecting a decline of 2.1% compared to the 1.8% projected in September.

The forecast for inflation in Russia in 2023 is the same at 6%.

The CBR's current forecast sees inflation of 11-13% in 2022 and 5-7% in 2023. The CBR's forecast for GDP is more conservative, projecting a slump of 4-6%, but the CBR has already said it will probably upgrade it; the CBR will release its new medium-term forecast after a board meeting on October 28. In 2023, the CBR forecast that the economy will shrink by 1-4%.

The Economic Development Ministry's forecast, meanwhile, is more optimistic than analysts' expectations. It projects that GDP will contract by 2.9% this year and 0.8% in 2023.

The poll results are the median forecasts of 26 economists from various organizations who took part in the survey. If a respondent gave a forecast in the form of a range of figures, its midpoint was taken for calculation, the CBR said.

The surveyed economists expect Russia's GDP to grow by 1.5% in 2024 and 1.7% in 2025, compared to 1.7% and 1.6%, respectively, in the September survey.

"This means that, according to analysts, GDP in 2025 will be 2.5% lower than the 2021 level (2.8% in the September survey). The estimate for long-term GDP growth rates is unchanged at 1.5%," the CBR said.

Economists now expect inflation to be 4.2% in 2024 and 4.0% in 2025, compared to 4% and 4.0% in the September survey.

Analysts now expect a slightly higher trajectory for the CBR's key interest rate compared to the September survey. The median forecast for the average key rate in 2022 is up by 0.1 percentage points to 10.6%, and the forecasts for 2023-2025 rose by 0.3 pp, to 7.1%, 6.4% and 6.0%, respectively. The estimate for the neutral key rate dropped by 0.5 pp to 5.5%.

Analysts also expect a stronger ruble for the whole forecast horizon compared to the September survey, with a gradual weakening trend. They expect a rate of 68.40 rubles per U.S. dollar in 2022, 71.40 rubles in 2023 and 74.70 rubles in 2024, compared to the 69.40 rubles, 73.10 rubles and 75.30 rubles forecast in September. The biggest change was for 2025, with analysts now forecasting a rate of 75.00 rubles/$1 instead of 79.70 rubles/$1.