On Wednesday, September 25, the Central Bank of the aggressor country of Russia actually announced the first signs of approaching stagflation, which combines high inflation with low economic growth indicators.
Points of attention
- The Central Bank of Russia has identified signs of stagflation with high inflation and low economic growth looming on the horizon.
- Experts predict inflation exceeding 4% and GDP growth slowing to 1%-1.5% in 2025, raising concerns about the Russian economy.
- While some economists foresee stagflation in Russia, others believe in a more moderate scenario with inflation around 5% and slower economic growth.
- Consumer and investment activities are cooling in Russia, contributing to the potential onset of stagflation.
- Inflationary pressures persist in Russia, leading to worries about the economy's future trajectory and the possibility of stagflation.
What will lead to large-scale stagflation in Russia
There are signs of cooling consumer and investment activity. Inflationary pressure remained high and the process of disinflation observed at the beginning of 2024 has not yet recovered, the Central Bank of the Russian Federation notes.
The Bank of Russia does not directly write about stagflation, but earlier its head Elvira Nabiullina used the word as a warning. She said that all central banks fear such a scenario.
What do economists say?
Statements by the Bank of Russia indicate that the central bank sees the economy on the brink of stagflation. Despite sanctions and labor shortages holding back output growth, corporations and consumers don't expect prices to slow. They also don't see double-digit loan rates as restrictive enough. The central bank has reason to worry — we expect inflation to continue to exceed the target level of 4%, and GDP growth is likely to slow to 1%-1.5% in 2025, — explains Alexander Isakov, Bloomberg Economics' Russia economist.
According to Oleg Kuzmin, another economist from Renaissance Capital, we should not expect stagflation in Russia.
In his opinion, the aggressor country is currently at the crossroads between "soft" and "hard" economic landing next year.
In both cases, growth will slow to 1.3% or 2.5%, but inflation should also fall to around 5%.
