Russia’s economy stabilising but growth to slow – CBR macro survey

Russia’s economy stabilising but growth to slow – CBR macro survey
Russia's economy is stabilizing but growth will slow in the next years, according to the CBR's April macroeconomic survey / bne IntelliNews
By bne IntelliNews April 18, 2024

Russia’s economy is stabilising with the spread in predictions of what’s coming later this year narrowing, the Central Bank of Russia (CBR) reported in its monthly macroeconomic survey. However, growth will also slow this year to 2.1% from the surprisingly strong 3.6% last year, and continue to slow to 1.7% and 1.6% in the subsequent two years.

“The ranges of analysts’ forecasts for the next few years have generally narrowed for most indicators. At the same time, the ranges for the key rate, unemployment rate, $/RUB exchange rate, exports, imports, Brent oil price are significantly widening by the end of the forecast period,” CBR reported in its monthly survey of professional economists.

Russia’s economy bounced back by more than most analysts expected in 2023 thanks to the military Keynesianism boost from the heavy spending on defence.

That pushed industrial capacity utilisation up to a record 81%, but with the labour market drum tight and little spare capacity available the upside for more growth is capped.

Russia’s growth potential is now thought to be 0.3%-0.5% as a result of sanctions and limited access to technology holding back Russia’s productivity which has also been falling. Nevertheless, the CBR is more optimistic on Russia’s long-term growth potential, placing it in the range of 0.9%-2% and the economy has already surprised on the up-side several times since the war in Ukraine began two years ago.

At the same time with the economy running very hot inflation has jumped, forcing the CBR to hike the prime rate to 16% and will have little prospect for rate cuts until the second half of this year at the very earliest. Currently, inflation is 7.2% in March, but the CBR estimates the full year’s inflation rate will fall to 5.4% before returning close to the CBR long-term target of 4% in the next two years.

Nevertheless, the survey is upbeat on the budget deficit which it forecasts will fall to 1.3% this year compared to last year’s result of 1.9%, which is more than the Ministry of Finance (MinFin)’s forecast of only 0.8% of GDP. The CBR predicts Russia will also run modest deficits of 1% in both 2025 and 2026.

The CBR is also upbeat on nominal wage growth, which ended last year up to 14.1% y/y, well ahead of 7.4% inflation in 2023, meaning that Russians enjoy a hansom 6.7% gain in real wages that has been feeding consumption

Russians can look forward to a similar feel-good increase in real wages in 2024 of 5.1% from the 10.3% gain in nominal wages set against the forecast 5.2% inflation rate.

The bounds surrounding Russia’s export volumes in 2024 are much wider than those on imports due the uncertainties over the efficacy of sanctions on Russian exports of oil and other commodities. But the existing sanctions and limited access to dollars is also pushing down the ruble which is expected to weaken slowly over the next years from an average of RUB85.2 in 2023, to RUB92.9 in 2024 until it comes close to RUB100 again by 2026.

The value of the ruble will also be predicated on the price of Brent, the benchmark that the MinFin now uses to set taxes. Here there is a lot of uncertainty with the CBR forecast ranging between $95 and $60 but concretely estimating an average price of $85 in 2024, $80 in 2025 and $75 in 2026. 

Below are the CBR comments in detail:


Inflation: Forecasts are unchanged. Analysts expect that inflation will return to the target of close to 4% in 2025 and remain at this level further on.

CBR monthly survey for April - CPI

Key rate: Analysts have raised the average key rate forecast over the entire forecast horizon: to 14.9% per annum (0.4 pp) for 2024, to 10.4% per annum (1.0 pp) for 2025, to 8.1% per annum (0.6 pp) for 2026. The neutral key rate estimate is unchanged at 7.0% per annum.

CBR monthly survey for April - Key rate

GDP: Analysts have improved the GDP forecast to 2.1% (0.3 pp) for 2024, to 1.7% (0.2 pp) for 2025, to 1.6% (0.1 pp) for the end of the forecast horizon. According to analysts, the GDP change in 2026 to the 2021 level will be 7.9% (7.3% according to the March survey). The estimate of the long-term GDP growth rate is unchanged at 1.5% per annum.

CBR monthly survey for April - GDP

Unemployment rate: Analysts expect that unemployment will stay at 3.0% over the entire forecast horizon (-0.1-0.2 pp in 2025-2026 compared to the March survey).

CBR monthly survey for April - unemployment

Nominal wages: Analysts have raised their forecast for nominal wages growth to 10.3% (0.4 pp) in 2024, followed by a deceleration to 7.1% in 2025 and to 6.1% by the end of the forecast horizon. Calculations based on analysts’ forecasts of nominal wages and average CPI suggest that real wages will increase by 3.2% (0.4 pp) in 2024, by 2.4% in 2025 and by 2.0% in 2026. Accordingly, by the end of the forecast horizon, real wages will be 16.6% higher than in 2021.

CBR monthly survey for April - nominal wages

Consolidated budget balance: Analysts expect a slightly smaller consolidated budget deficit of 1.3% of GDP in 2024. According to analysts, consolidated budget deficit will decline to 1.0% of GDP in 2025 and 2026.

CBR monthly survey for April - consolidated federal budget

Exports of goods and services: Analysts have slightly revised their forecast for 2024 upwards to $478bn ($6bn) and downwards to $482bn (-$7bn) for 2025. The forecast for the end of the forecast horizon is unchanged at $490bn, which is 11% lower than exports in 2021.

CBR monthly survey for April - exports of goods & services

Imports of goods and services: Forecasts have barely changed: $385bn ($1bn) for 2024, $395bn (-$2bn) for 2025, $409bn ($1bn) for 2026, which is 8% higher than imports in 2021.

CBR monthly survey for April - import of goods & services

$/RUB exchange rate: Analysts’ forecast for 2024 is 92.9 rubles per dollar, 95.9 rubles per dollar for 2025 and 98.0 rubles per dollar for 2026 (revised by 1.9–3.2% compared to the March survey).

CBR monthly survey for April - FX

Brent oil price: According to analysts’ expectations, the average Brent oil price in 2024 will be $85 per barrel ($5 per barrel compared to the March survey). The price will then decrease to $80 per barrel in 2025 and to $75 per barrel in 2026.

CBR monthly survey for April - Brent prices