High risks and weak pace of economic growth: Russia macroeconomic forecast for the medium term

Abstract

This paper examines prospects for the Russian economy in the mid-term until 2026. The authors identify four key factors that determine future dynamics: sanctions, the state of foreign trade, relations between Russian and foreign businesses, policy of the government and the Bank of Russia. The basic scenario of our forecast is based on the most probable future trends in development of foreign trade, investment activity, industrial dynamics, changes in exchange rate of the national currency, inflationary picture and monetary policy. The conservative scenario takes into account the manifestation of some negative risks, probability of which the authors consider as quite high. For both scenarios, the authors offer a list of risks that can have a significant impact on the forecast values. Results of modeling economic dynamics indicate that in the medium-term Russia will face moderate recovery growth, and there will be no real opportunities to accelerate it. By the end of 2026, the Russian economy will increase in the range of 5.6—7.8% compared to the level of 2021. The results of the presented work can be used for a critical comparison with official forecasts of the Bank of Russia and the Ministry of Economic Development of the Russian Federation in order to improve the efficiency of budget planning for future periods.