MOSCOW, August 11The more significant the overheating in the Russian economy, the higher the probability that the pendulum will swing with the same force in the opposite direction, which will lead to a recession, said Deputy Chairman of the Bank of Russia Alexey Zabotkin in an interview with Rossiyskaya Gazeta.
«The more significant the overheating, the higher the probability that the pendulum will swing with the same force in the opposite direction. Which will lead to a recession. Timely tightening of monetary policy simultaneously solves the problem of slowing inflation by cooling demand growth and reduces the risk that a much more significant contraction will spontaneously occur,» he said.
He noted that high rates of economic growth have been observed in the country for several quarters now. But if until the middle of last year they were accompanied by a moderate increase in prices after their sharp jump in the spring of 2022, then since the second half of last year there has been a repeated acceleration of inflation.
The Deputy Chairman of the Central Bank explains that until mid-2023, economic growth was of a restorative nature and was based on the attraction of previously free resources (production capacity, labor). And over the past year, the growth in the output of goods and services is associated not only with the progressive expansion of our production capabilities, but also with overheating of demand — this is what a significant increase in inflation signals.
If demand in the Russian Federation is not contained, companies will compete more aggressively for scarce resources, and citizens, fearing the unwinding of inflation, will run for loans and buy goods for future use, Zabotkin emphasized.
He recalled that the Central Bank's forecast assumes GDP growth in both 2024 and 2025, and next year it will be more restrained — 0.5-1.5%, but not because the expansion of production capabilities will slow down, but only because demand, which «ran ahead» due to the sharp breakthrough of 2023-2024, will «take a break», that is, it will stabilize at the high levels achieved, will stop further and further breaking away and, finally, will give time for production capabilities, capacities, labor productivity to catch up with it.