Domestic demand accelerates economic growth

The acceleration of economic growth that started in 2019Q3 continued into 2019Q4. As domestic demand recovered, the economy registered signs of a strengthening in inflationary pressure which pave the way for inflation to return to target by late 2020. These are the findings by the authors of the latest issue of Talking Trends, the Bank of Russia’s Research and Forecasting Department’s bulletin.

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Russia’s economic growth is accelerating further and, according to estimates, is poised to reach its potential in 2020 H1. This will be largely facilitated by improved domestic demand which offsets negative effects of subdued growth of the global economy on Russian exports. The revival of consumer spending and the catch-up dynamics of budget expenditure in the second half of the year boost growth in domestic demand.

The slowdown in annual inflation caused by a number of disinflationary factors will continue in early 2020 when inflation temporarily drops below 3%. However, November saw a rise in inflationary pressure as domestic demand recovered. Coupled with the fading effect of one-off disinflationary factors and the delayed impact of monetary policy decisions taken in 2019, this lays the groundwork for inflation to return to 4% by the end of 2020.

The views and recommendations expressed in the bulletin do not necessarily reflect the official position of the Bank of Russia.

19 December 2019

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