Russian regions: economic activity revives

In January—February 2021, economic activity continued to bounce back in Russian regions. About one-half of the monitored enterprises reported an increase in output to pre-pandemic levels.

Annual inflation kept rising in February, driven by the further growth of consumer demand coupled with persistent pressure put by higher costs. These and other trends are covered in detail in the new issue of the analytical review Regional Economy: Commentaries by Bank of Russia Main Branches.

The economy was supported by expanding output in manufacturing. Coal production was up amid a favourable environment in the global market. As Russian regions are gradually easing restrictions, this contributed to the recovery in retail and services. Domestic tourism demonstrated significant growth as travels abroad are predominantly prohibited. Corporate lending growth sped up in many regions.

Conversely, as household incomes were recovering slowly, this hindered the rise in consumer demand. Companies expect demand to increase further, while reporting a stronger impact of input costs on prices. The pass-through of input costs became a proinflationary factor. In a number of food markets, inflation was stabilised owing to the introduction of caps on sugar and sunflower oil prices, the export quota and duty for wheat, and producers’ arrangements to limit egg and poultry price growth.

The new issue includes special topics: the influence of regulatory measures on food prices and the state of regional budgets.