Economic Ministry upgrades Russia’s 2021 GDP forecast to 3.8%

MOSCOW, Jul 9 (PRIME) -- The Economic Development Ministry has upgraded its Russia’s gross domestic product (GDP) growth forecast to 3.8% in 2021 from 2.9%, as seen by PRIME in an interim edition of the forecast on Friday.

“The estimate for Russia’s 2021 GDP growth is 3.8% against 2.9%. The reason for the increase of the GDP forecast for 2021 is better dynamics of consumer and investment demand,” a spokesperson for the ministry told reporters.

The GDP growth forecasts for 2022 and 2023–2024 were maintained at 3.2% and 3%, respectively.

The Russian economy will return to the pre-crisis level in July, the spokesperson said.

“Our old scenario conditions was formed in March on the basis of data for January–February, but now we have the data for March–May, and we see that the economy is recovering faster than we expected. The May GDP was 0.3% below the pre-pandemic level of the fourth quarter of 2019. We expect achievement of the pre-crisis level already this month,” the person said.

Russia has not yet exhausted potential for economic recovery demonstrated by a 2% year-on-year rise in fixed capital investment in January–March. The key operating indicators for April–May signal very robust performance of investment in April–May, the spokesperson added.

The ministry also raised its expectations of 2021 inflation to 5% from 4.3%, but the forecast for the next three years remains at 4%.

Expectations of higher fixed capital investmen in the country in 2021 were upgraded to 4.5% from 3.3%, and the spokesperson said that the revision was underpinned by recovery in housing construction, and expansion of budget-supported construction in spite of higher metals prices.

At the same time, the ministry’s maintained its estimate for Russians’ real disposable income growth this year at 3%, while the forecast for real wages increase was raised to 3.2% from 2% due to a faster than expected recovery of the labor market.

Russia’s industrial output will still rise by 2% this year, but the forecast for 2022 was improved to 3.6% from 3.4%. The processing industries will expand by 2.4% this year and by 2.5% next year, while the mining industry will grow by 0.7% this year and 5.9% next year.

The retail turnover growth estimate was also improved to 6.9% in 2021 from 5.1%, to 3% in 2022 from 2.9%, and to 2.9% per year in 2023–2024 from 2.8%. Provision of paid services will  also rise by 14.3% in 2021, up from 11.3% expected in the April forecast, and by up to 5.2% in 2022 and up to 3.5% in 2023–2024.

Moreover, the Economic Development Ministry upgraded the forecast of the average annual price of the Urals oil blend to U.S. $65.9 per barrel in 2021 from $60.3 per barrel, and the average annual ruble rate against the U.S. dollar to 72.8 rubles from 73.3 rubles.

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