Russian economy remains on growth trajectory in Q2, there are risks of entering overheating phase - CBR analysts

MOSCOW. May 30 (Interfax) - The Russian economy remains on a growth trajectory in Q2 amid increased demand from the public sector and a revival of consumer and investment demand from the private sector, while supply lags behind the expansion of demand and there are risks of entering an overheating phase, according to the Talking Trends bulletin prepared by the Central Bank's Research and Forecasting Department.

"According to the department's estimate based on preliminary Rosstat data [1.9% year-on-year decline in Russian GDP in Q1], seasonally adjusted GDP growth in Q1 was 0.6% q/q. Preliminary data indicate that the same GDP growth rate will persist in Q2 as well," the regulator said.

At the same time, analysts at the Central Bank note that domestic supply trends lag behind domestic demand trends. "If it is impossible to close this gap by increasing imports, the economy will enter a phase of overheating, when prices will respond to further growth in demand to a greater extent and to a much lesser extent - production," the Central Bank said.

"If supply does not adjust to the expansion of demand in a timely manner, the economy may enter a phase of overheating," the review said.