Gaidar Institute Presented Macroeconomic Forecast for 2017–2018

The press conference was held by  Gaidar Institute’s Academic Director Sergey Drobyshevsky, head of the Department of Financial Studies Mikhail Khromov, and RANEPA Center for the Study of Central Banks leading researcher Pavel Trunin.

According to Sergey Drobyshevsky, all conditions for slow sustainable growth have now generally developed in the economy, and no strong shocks – both internal and external – are expected in the short term. According to the conservative forecast, GDP growth in 2017 is expected to reach 0.6%, in 2018 – 1.7%. According to the baseline forecast, GDP growth in 2017 is expected to reach 1.7%, in 2018 – 4%. “The macroeconomic forecast was prepared based on the results of the year 2016 which was quite good for the Russian economy. Now we can say that the last year was the bottom of the crisis. In the foreseeable future, this was the last year when the growth rate was negative”, Sergey Drobyshevsky said.
The expert noted that there were a number of factors that would contribute to recovery growth. These are, in particular, “positive dynamics of the growth rate of industrial production and investment, minimum level of inflation, lack of strong fluctuations of the national currency in the currency market. On the whole, 2016 was a watershed year, and we expect positive growth rate in the next two years at 1.5–2% of GDP, which coincides with the new forecast by the Russian Ministry of Economic Development. Steady positive growth rate will be neutral to fluctuations of world oil prices and changes in the external economic situation”, Sergey Drobyshevsky concluded.

Pavel Trunin touched upon the problem of keeping inflation low. “Last year, the inflation rate was at historically low levels – this had not happened in the modern history of Russia. Therefore, all conditions are in place for the Central Bank to get closer to its goal – 4% inflation as of year-end 2017. Central Bank’s monetary policy on setting the key rate, as well as several other factors, contributed to the achievement of such low inflation level. Among these factors: slow pace of economic growth, low growth rate of income of economic agents and the population, fiscal policy that did not contribute to inflation acceleration, exchange rate dynamics which led to lower rate of price increase of goods and services”, Pavel Trunin said.

However, according to the expert, there are a number of risks that could lead to exceeding the target level of inflation: easing of monetary policy, growing budget expenditures due to the political cycle, growing household spending, rising prices due to further ruble depreciation. “Since the beginning of the recovery processes in the economy, even as the key rate has maintained unchanged, interest rates have been actually declining. That is, monetary policy is softening even while the rate is unchanged. When the national currency was falling, economic agents indexed prices with a margin, which allowed to keep prices down while the national currency was strengthening. The period of ruble appreciation appears to be over now, and further risks are associated with ruble depreciation which will affect the acceleration of inflation. Besides that, despite passing a fairly tight three-year budget, the election year will create conditions for loosening the fiscal policy. Rising real incomes and wages will also create the risk of inflation acceleration. When incomes are rising, people do not immediately shift the incomes to consumption”, Pavel Trunin said.

Referring to the situation in the banking system, Mikhail Khromov warned that lending volumes growth rate in the real sector is not as high as required by the recovery economic growth.

“Overall lending dynamics remains very weak, as evidenced by the slight increase in corporate borrowers’ nominal debt to the banks. This nominal growth is lower than the nominal growth of the economy. High nominal lending interest rates restrict lending. Despite the fact that the gap between the key rate and the lending rate has decreased by 1 percentage point, the key rate still remains high, and the borrowed funds remain quite expensive for borrowers in the real sector”, Mikhail Khromov explained.

Video of the press conference >>>