BOFIT Viikkokatsaus / BOFIT Weekly Review 2022/33

According to the Central Bank of Russia’s recent draft documents on 2023–2025 monetary policy and financial market development, a key task of monetary policy and financial markets will be to support the economy’s adjustment to a very challenging operational environment. The central goals are to keep inflation moderate (4 % p.a.), provide financing for important investment projects and reduce the reliance of Russia’s financial system on “unfriendly countries.”

The CBR evaluates that it could introduce various regulatory and other measures to support fixed investment. It states that all public sector support measures should be based on a taxonomy with criteria for eligibility favouring projects that promote technological sovereignty and modernisation of the economy. The CBR also wants to see household savings channelled more effectively to funding fixed investment through such measures as increased pension saving, expanding pension fund investment possibilities and greater access of private persons to direct acquisition of corporate shares and bonds.

To mitigate financial system vulnerability, the CBR could introduce regulatory measures that reduce the use of currencies of “unfriendly countries” by the banking sector or as the payment currency in contracts. Moreover, capital controls should be limited to unfriendly countries and international payment possibilities using “friendly” currencies encouraged. The financial sector should increase its use of domestic credit ratings and locally-developed software. The CBR said that it is not planning to acquire the assets of Russian financial institutions that are frozen abroad.

In the CBR’s base forecast scenario, Russian GDP is expected to contract by a total of 5–10 % this year and next, and then return to modest positive growth of 1.5–2.5 % a year in 2024 and 2025. The CBR sees private consumption during 2022 and 2023 falling by 5–10 %, while fixed investment should decline by 4–12 %. The central bank also estimates that the volume of exports will fall by 20–30 % and imports by 25–35 %. In its more optimistic scenario, the CBR forecast sees the economy adjust to the harsh operating environment more quickly than expected. Under its pessimistic scenario, world economic growth falters and additional sanctions are imposed on Russian exports. No scenario foresees easing external conditions.

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