By Andrea Hargraves 
The Central Bank of Russia (BCR) maintained on Friday Interest rate at 7.50% It has improved its GDP growth forecast for this year, and now expects a recession of between 3.5% and 3%.
In July, BCR forecast a recession of between 6% and 4% this year.
The BCR board reviewed macroeconomic data at its regular meeting on Friday, in which it indicated that Russia will remain In a 2023 recession with a contraction between 1% and 4%Although the economy is expected to return to growth in the second half of next year.
Thus, you expect GDP to grow between 1.5% and 2.5% year-on-year in 2024-2025.
The Russian Monetary Agency indicated in its analysis that high-frequency indicators indicate Stronger business dynamics In the third quarter than expected.
BCR argued that an increasing number of companies are adapting to operate with foreign trade and financial constraints due to Russia’s military campaign in Ukraine.
This is facilitated by the gradual diversification of suppliers of finished products, raw materials and components, As well as import substitution And it is conquering new markets, including reorienting towards local consumers, he said.
However, surveys show that a large percentage of companies “still face difficulties In production and logistics“.
Labor market restrictions are also increasing, driven in part by the partial mobilization ordered by Russian President Vladimir Putin on September 21. To send 300,000 men to the front lines In Ukraine, he recognized the monetary authority headed by Elvira Nabiulina, without putting a number on development.
“While the partial mobilization may primarily create anti-inflationary pressure in the coming months due to weak consumer demand, its subsequent effects will be pro-inflationary as it adds supply-side constraints to the broader economy,” the regulator said.
The updated forecasts of the Bank of Russia assume that inflation at the end of 2022 will be between 12% and 13%.
In conjunction with the mobilization announcement, business and consumer confidence worsened slightly in September due to increased global uncertainty, he admitted.
“Under these circumstances, the recovery of consumer activity which remains moderate, slow downexplained BCR.
At the same time, he added, domestic demand was supported by fiscal policy measures, particularly through increased demand from the public sector.
The Russian Central Bank clarified that it left the interest rate unchanged due to the current consumer price growth rates as a whole keep lowwhich contributes to a further slowdown in the rate of inflation on an annual basis.
In September, consumer price growth slowed to 13.7% y/y (versus 14.3% in August) and fell to 12.9% by Oct. 21.
According to the forecasts of the Bank of Russia, annual inflation will fall to between 5.0% and 7.0% in 2023 before returning to 4% in 2024.