What is happening in the Russian economy and how will it affect Belarus?
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On March 18, 2022, the Council of the Bank of Russia decided to keep the key supply at the level of 20% per annum and shared its forecasts for the development of the Russian economy. Taking into account the close economic ties that have developed between the countries, it is possible to predict the prospects for the development of the Belarusian economy.
The liquidity crisis in banking has been delayed.
As noted by the regulator, the decision to exclude the key rate up to 20% per annum in the timing and stabilizing measures for the presence of changed external conditions and the direction of unprecedented consequences of supporting financial stability and preventing uncontrolled price growth. The liquidity situation has stabilized, the outflow of bank deposits has slowed down. If at the peak of the provided volume of liquidity 10 trillion rubles was reached, then in early March, a structural liquidity deficit of 7 trillion rubles. observed at present more than doubled.
According to the regulator, the Russian economy is entering a phase of large-scale structural adjustment, which will be accompanied by a temporary but inevitable period of increased sensitivity and a decline in GDP. At the same time, the Bank of Russia still believes that its monetary policy creates the conditions for the economy to gradually adapt to new conditions and return the annual supply to 4% in 2024.
Fundamentals of anti-inflationary policy will be market instruments
Acceleration of supply at the end of February – beginning of March was stimulated by a rush demand, especially for non-food products and food products for a long time. The regulator regulates the increased dynamics by changing the rate of economic growth to new conditions. The main difficulties as a result are explained by interruptions in production and logistics chains, in settlements with foreign counterparties. In the future, in the context of a reduction in imports and the emergence of partial markets for the external economy, the Russian economy should increase import substitution.
At the same time, unlike its Belarusian colleagues, the Bank of Russia allows the introduction of manual price regulation, since their artificial containment inevitably reduces the incidence of shortages and confirms the quality of products, and can also have a negative economic effect in the form of a slowdown in the rate of adaptation of the economy to new conditions. At the same time, it is important to stop abuses by governments that occupy high positions in the market and cartel deals.
As a regulator growth, relative price adjustment cannot be alone. This means that inflation will remain elevated for some time, but it promises to prevent an inflationary spiral from unwinding.
GDP slowdown to 8% in 2022
The specific numbers of the regulator’s forecast, which was appointed, but assumed that the increase in supply next year will be higher than previous estimates, but in terms of population coverage, it is suspected in the coming quarters. A new macroeconomic forecast of the Bank of Russia is given.
We remind you that in accordance with the pre-crisis macroeconomic forecast presented in the forecasts, Russia’s GDP growth is expected at the level of 2-3%. A more recent survey conducted by the main bank of the Russian Federation in early March showed that in 2022, instead of growth by 2.4%, GDP risk reduction by 8.0% is expected. The forecast for 2023 is reduced by 1.1 p.p. to 1.0%, for 2024 – by 0.5 p.p. to 1.5%. Estimated expected GDP growth rates have been reduced by 1.0 p.p. up to 1.0%. As for the question, in the March poll, the forecast for 2022 is raised by 14.5 percentage points. to 20.0%, for 2023 – by 4.0 p.p. to 8.0%, and for 2024 – by 0.8 p.p. up to 4.8%.
Problems and Solutions
Despite the fact that the negative prospects for the development of the Russian economy are also capturing Belarus, our country from the policy of Russian self-isolation is becoming closely economic cooperation, a super-favorable regime for Belarusian enterprises, the effect of import substitution, and lower prices for raw materials and energy resources. All this can help to reduce the losses caused by the introduction of penalties.
However, the more active use of price regulation regulation, the slowdown in investment activity and lending, an unfortunate moment for the implementation of tax reform, are becoming factors that slow down the adaptation of the Belarusian economy to new realities. Much will be American from the implementation of anti-crisis policy. But given the rate of slowdown in economic growth (which we observed in the observations), it is likely that in the coming months Belarus is approaching the identification of GDP growth rates.