CBR maintains Russian GDP forecast for 2023 at 1.5-2.5%, revises it down from 0.5-2.5% to 0.5-1.5% for 2024

MOSCOW. Sept 15 (Interfax) - The Russian Central Bank has maintained its Russian GDP growth forecast for 2023 at a level of 1.5-2.5%, the regulator said in a statement following a meeting of the board at which the key rate was raised to 13% from 12%.

At the same time, the Central Bank lowered the upper bound of the interval forecast of Russian GDP growth in 2024 - now the forecast is 0.5-1.5% compared with 0.5-2.5% in the July version.

The Central Bank kept the forecast for Russian GDP growth in 2025 in the range of 1.0-2.0%, and for 2026, kept it in the range of 1.5-2.5%.

The CBR emphasized that high domestic demand was strengthening the divergence of the Russian economy up from a balanced growth trajectory.

"Economic activity is growing across a wide range of industries. High domestic demand is intensifying the upward deviation of the Russian economy from the balanced growth path. This is also the reason behind a persistently elevated demand for imports. High demand for imports coupled with reduced exports is a key factor of the ruble's depreciation since early 2023. Demand for imports will be adjusting to the weaker ruble and the adopted key rates decisions in the coming quarters," the regulator said.

"Confident growth in domestic demand is due to the expansion of private demand while maintaining government demand at a high level," the CBR said. "The increase in consumer activity is supported by high rates of lending, growth in real wages and the population's adaptation to the new structure of supply in commodity markets," the report says.

Economists at the Central Bank also note that "the completion of the recovery phase of the Russian economy means that its growth will slow down in the future due to restrictions on the supply side," the CBR said. "This primarily concerns the state of the labor market, where the shortage of available labor resources is increasing. Unemployment has again reached a historical low. Low geographic and intersectoral labor mobility is an additional structural limitation," the Central Bank said.

Deputy Russian Central Bank Chairman Alexei Zabotkin, at a briefing following the board meeting, linked the reduction in the 2024 GDP growth forecast to expectations of lower growth in domestic demand in the context of a more stringent monetary policy and a downgrade in the forecast for export increases in physical terms next year.

"The forecast for next year in terms of GDP growth has been revised to 0.5-1.5% from 0.5-2.5%. The revision is associated with two factors. The first is a more restrained growth in domestic demand in the context of a more stringent monetary policy so that the economy returns to a balanced growth path, and inflation returns to its target of 4%. The second component is that we have slightly revised the export growth rate for next year downward in physical volume terms, taking into account incoming data and emerging trends. This will also subtract a bit from the projected growth for next year compared to the previous forecast," Zabotkin said.

The Central Bank's forecasts for 2023-2025 on the dynamics of the Russian economy diverged from those of the Ministry of Economic Development.