Inflation targeting and exchange rate flexibility are key growth enablers for Russian economy, IMF says

Between 15 and 23 May 2019, the IMF European Department mission held a number of meetings in Moscow with Bank of Russia representatives and several Russian agencies as part of consultations under Article IV of the Fund’s Articles of Agreement.

The IMF expects this year’s GDP growth rate will remain within the range of average rates seen over the last three years. The fund believes that the robust macroeconomic framework that has been put in place since 2014 is set to enable potential economic growth. This includes inflation targeting, ruble exchange rate flexibility and the fiscal rule, which all work to curb the impact of external factors and reduce uncertainty about the domestic environment. IMF experts are of the opinion that the financial sector’s improved resilience has helped banks expand their contribution to sustaining economic growth.

The IMF notes that the Bank of Russia’s monetary policy delivers on the task of maintaining price stability. The fund’s experts estimate the current monetary policy stance as moderately tight, forecasting that inflation will return to 4% in early 2020 under a declining path for the Bank of Russia key rate. In the mission concluding statement, IMF experts recommend that the efforts towards strengthening banking supervision and regulation should continue, in particular driving down per-borrower exposure and fully implementing Basel III regulatory standards, while additional measures to curb unsecured consumer lending may also be needed.

For the full text of the mission concluding statement, see the IMF website.

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