The Russian economy is not expected to go into a recession next year, the head of the central bank, Elvira Nabiullina, announced on Friday.
The country’s GDP is forecast to grow by around 2.7% this year, driven by strong domestic demand. For 2024, the central bank is projecting growth of 0.5% to 1.5%. This estimate, however, will be reviewed in February, Nabiullina said, adding that it is important to make “timely decisions” to cool excess demand and reduce inflation.
The announcement came shortly after the Bank of Russia raised the key rate by 100 basis points to 16% per annum, due to remaining inflationary pressures. It’s the fifth hike in a row since last summer, when rates were at 7.5%.
According to the regulator’s statement, persistent inflationary pressures have increased in recent months due to domestic demand more potently exceeding the economy’s capacity to expand the production of goods and services than the Bank of Russia’s previous estimates.
Inflation expectations, a key metric for monetary policymakers, surged last month, despite the recent appreciation of the ruble. The central bank said in its statement that both household and business inflation expectations also have increased.
The regulator noted that annual inflation for the year would be close to the upper bound of its 7-7.5% forecast range.
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