Russia's economic forecast, revised upward by VEB

Estimates for Russia's economic growth over the coming years were updated late last week, and according to the national economic development institute VEB, the country's Gross Domestic Product (GDP) is expected to grow by 2% in 2024, up from 1.6% , as was the previous forecast, announces oreanda-news.com.

Analysts expect that the advance of Russia's GDP will be facilitated, next year, by increased investment dynamics, including the use of money from the National Social Assistance Fund, as well as by the active development of industrial production.

However, according to experts, in the coming years, the growth rate of the Russian economy will remain approximately at the level of 2024. Thus, GDP is expected to grow by 2.1% in 2025 and by 2.2% in 2026 Previously, the forecast released in October showed a growth of 2.3% in 2025 and 2% in 2026.

Analysts note that the pressure of sanctions imposed on Russia by the West and a slowdown in the global economy may be constraining factors for growth.

Russia's economy grew by 3.6% in 2023, and President Vladimir Putin highlighted that the expansion exceeded the average advance of the global economy by 0.6 percentage points, and with regard to developed countries - by 2.1 percentage points.

Last week, the International Monetary Fund (IMF) warned that the Russian economy continues to face significant obstacles, even if the institution changed its estimates for the growth of the country's economy in a positive sense. At the end of January, the IMF doubled its forecasts regarding the pace of economic growth in Russia this year: +2.6%, compared to 1.1%, as predicted in October.

Despite this, IMF Managing Director Kristalina Georgieva sees more trouble ahead for Russia. The IMF official declared, according to CNBC: "Russia's economy is one of war, in which the state - which, let's remember, had a considerable buffer, accumulated over many years of fiscal discipline - invests. Today, production in Russia is increasing for the military, and consumption is decreasing. This is what the Soviet Union looked like: high level of production, low level of consumption. In fact, I think the Russian economy is going through very hard times because of the flow of people leaving the country and the reduced access to technology that comes with the sanctions. So, although the numbers on the progress of the Russian economy look good, there is "a whole story" behind them, and it's not a very good story.

• The Bank of Russia maintains interest at 16%

Russia's central bank decided on Friday to keep its policy rate at 16%, as analysts had expected, although the country still faces inflationary pressures, according to Reuters. Economists estimate that interest rate cuts will begin this year, but they will not fall below 10% until the end of next year.

From July to December 2023, the Bank of Russia raised the policy rate five times, by 850 basis points, as the ruble depreciated above the 100/dollar mark and the Kremlin called for monetary tightening.

The central bank informed on Friday: "In 2024, the return of inflation to the target and its stabilization close to 4% implies that the tightening of the monetary policy will be maintained for a long time". According to the Moscow-based institution, inflationary pressures have eased compared to last fall, but remain high, with domestic demand still exceeding production capacity.

The central bank now expects the Russian economy to grow by 1-2% in 2024, compared to the previous estimate of 0.5-1.5%.