8 Jun 2023 09:25

Growing demand in Russia covered by supply, no major risk of inflation exceeding forecast in 2023 - minister

SOCHI. June 8 (Interfax) - The recovery of consumer demand in Russia is being accompanied by an increase in supply, both through domestic production and imports, so there is no significant risk that inflation will exceed the forecast of 5.3% in 2023, Economic Development Minister Maxim Reshetnikov told reporters in Sochi on Wednesday.

"Statistics show positive trends [in the economy]. Russia's GDP grew by 3.3%, partly due to the effect of the low base. The economy is continuing to restructure, export-oriented sectors are recovering, growth is continuing in sectors oriented toward the domestic market, investment activity is continuing, wages are growing and demand is recovering," Reshetnikov said.

"And the growth of consumer demand is being accompanied by the growth of supply, both domestic production and imports. So at the moment we don't see significant risks that inflation will exceed our forecast," Reshetnikov said when asked if growing demand could significantly accelerate inflation in Russia.

The ministry "will take all these trends into account in the socioeconomic development forecast in September 2023," he said.

Central Bank of Russia (CBR) analysts said last week that there was a possible risk of the Russian economy overheating due to supply lagging behind growing demand. "If supply does not accommodate the expansion of demand in time, the economy could enter a phase of overheating," the CBR's research and forecasting department said in a bulletin on current trends.

"If this gap cannot be closed by increasing imports, the economy will enter the phase of overheating, where prices will respond more to further growth of demand and production [will respond] to a much lesser degree," the CBR analysts warned.

The Federal Statistics Service reported on Wednesday that weekly inflation in Russia accelerated to 0.21% in the week from May 30 to June 5, from 0.08% in the week of May 23-29 and 0.04% from May 16 to May 22.

Annual inflation accelerated to 2.68% as of June 5 from 2.41% on May 29, the Economic Development Ministry estimated. "The acceleration of inflation year-on-year was due to the correction of prices downward in June 2022 [when there was deflation of 0.35% month-on-month] after a significant increase in March-April 2022," the ministry said in a report on the current price situation.

The CBR forecast inflation of 4.5-6.5% in 2023, while the Economic Development Ministry expects a rate of 5.3%. The consensus forecast of economists polled by Interfax is 5.8%.