The economy starts on a sustainable path of recovery as inflation lowers to the target

2017 Q1 economic activity suggests that the economy is on course to attain a slow but sustainable path of growth. Annualised inflation may well reach a point below 4% as early as April-May. These are the findings of the current issue of Talking Trends, the Bank of Russia’s Research and Forecasting Department bulletin.

Growth in prices in March remained low, decelerating faster than the Bank of Russia’s recent forecasts. This trend may well hold into the whole first half of 2017. However, the potential growth in inflationary pressure around the second half of the year could pose higher risks to inflation in terms of the need to sustain it close to the target over a medium-term horizon, notes the bulletin.

Economic recovery in the first quarter of 2017 slightly outperforms the Bank of Russia’s forecasts, helped by the current favourable external and financial conditions observed since late last year.

Recovered investment activity is expected to become a key driver of GDP growth in the near future, also helped by growth in other GDP components, the authors note. These developments would be helped, the analysts believe, by improved investor and producer expectations as to the outlook for a rebound in domestic demand, to be triggered by a continued downward movement of inflation, higher oil prices and the resulting improvements in corporate profits.

The views and recommendations expressed in the Bulletin are solely those of the authors and do not necessarily reflect the official position of the Bank of Russia.