The departure of Western brands from the domestic market and the ban on the supply of certain foreign goods led to an increase in domestic production
Photo: Vladimir MAZENKO
At the Central Bank published regular report on monetary policy. The Central Bank does this every quarter. Analyze fresh data and refine your forecast. This time the report came out quite optimistic. Despite sanctions and other restrictions on foreign trade, the Russian economy is coping well with the difficulties. And most likely even will grow in the next three years. There are several reasons, as always.
1. Import substitution
The withdrawal of Western brands from the domestic market and the ban on the supply of certain foreign goods led to an increase in domestic production. Russian entrepreneurs began to occupy the vacated niches. And it became a catalyst for growth.
– The indicator of the business climate of the Bank of Russia in April rose for the sixth month in a row and reached its maximum since June 2013. Current conditions have improved in most industries. The most positive assessments were made in manufacturing industries. To a greater extent – among manufacturers of investment goods (production of building materials, engineering products, and so on). This happened in response to an increase in the volume of domestic orders, the report of the Central Bank says.
2. State support
Last year, many industries needed state support. It was necessary to rebuild supply chains and find new suppliers. The budget generously allocated money for this – several trillion rubles. In particular, in the form of benefits and government orders. These funds increased the money supply in the country. Production capacities in many industries are record-breaking. And this, in turn, was reflected in the overall growth of the economy.
3. Consumer demand
Saving behavior prevailed among the population last year. This is what always happens during a crisis. People start saving and saving as much as possible. So that in which case they had a stash. A year later, many realized that there was no point in further austerity and began to return to normal consumer behavior. Plus, pent-up demand began to take its toll.
– The main driver of economic expansion in 2023 will be domestic demand. Household demand will especially support output. Its growth will continue throughout the year, the report of the Central Bank says.
Forecast for the future
According to the Central Bank, the growth of the Russian economy will gradually accelerate. And if this year it will be symbolic – in the range from 0.5 to 2%. That in the next years can accelerate to 2.5%. Sanctions will not allow moving faster. On the one hand, they, of course, stimulate import substitution and the growth of domestic production. On the other hand, they limit investment activity. Analogs are not always of good quality. And the general uncertainty does not really encourage entrepreneurs to invest the maximum possible resources in expanding their business. If certainty appears, economic growth may be higher.
