Normality of economic slowdown and energy crisis: statements by Novak

MOSCOW, May 12. /TASS/. Economic dynamics are cyclical, with a period of high growth always followed by a correction. This is a normal stage for the economy, Russian Deputy Prime Minister Alexander Novak said in an interview with Vedomosti. Russia does not view the energy crisis caused by the conflict in the Middle East as an additional source of solving its budgetary and macroeconomic objectives, he noted. TASS has compiled the key statements by Deputy Prime Minister. Economic dynamics are cyclical; a period of high growth is always followed by a correction, "this is a normal stage for the economy": "It is important to pay special attention to risk management to mitigate the consequences and ensure a more rapid transition to balanced economic growth." "Inflation will approach 5.2% in 2026 and will be close to the target level of 4% starting 2027." The government expects GDP growth at 0.4% this year, followed by a recovery in growth rates from 1.4% in 2027 to 2.4% in 2029. Consumer activity will slow down this year, though the slowdown in demand will not "limit long-term and sustainable economic growth." Predictable and sustainable fiscal policy creates room for reducing inflation risks and normalizing interest rates: "The more predictable and sustainable the fiscal policy is, the more room there is for reducing inflation risks and gradually normalizing interest rates." Russia faces systemic work to develop its financial and long-term savings markets: "The main thing is to stimulate capital market development and encourage companies to launch IPOs. Linking government support, including preferential lending, to capital market access." Investment activity growth will resume in 2027 amid low inflation and a balance of production and demand: "Further growth will resume in 2027 when production capacity equals demand, with low inflation having a beneficial effect on interest rates, providing room for further monetary policy easing, and, taking into account lags, the effect of easing already in place becoming noticeable." Real wages in Russia grew by 4.4% last year, while poverty fell to a "historical minimum of 6.7% by the end of 2025." Unemployment in Russia in 2026 "will remain low," within the range of 2.3-2.4%. Real income of Russian population gained 26.1% over three years: "Growth was driven by all components: wages, social benefits, entrepreneurial income, and property income. This is the highest rate in the last 20 years." "In 2026, we expect real income of population to grow by 1.6%. In 2027-2029, income growth rates will increase as economic growth accelerates." Growing energy export prices are strengthening the ruble, which "partially offsets" the positive effect on the Russian budget, "but this effect is not long-term": "It is important to continue pursuing a pragmatic and conservative policy." Russia does not view the energy crisis caused by the conflict in the Middle East "as an additional source of solving budgetary and macroeconomic problems." At the same time, additional inflationary risks arise due to the transfer of rising global prices to the domestic market: "For high-risk goods, we have a well-established mechanism for balancing the domestic and foreign markets: fuel, sulfur, wheat, corn, fertilizers, petroleum products. However, it’s important to monitor the market situation and adjust respective mechanisms in a timely manner," he said. Global oil prices could fall below pre-crisis levels in the medium term if the conflict in the Middle East drags on: "According to various international agencies, the conflict will cause a decline in global GDP growth rates by 0.3-0.5 percentage points in 2026-2027, possibly even more, depending on its duration. In Southeast Asian countries, which are more dependent on oil imports from the region, the decline could be significantly greater. This means global demand will decline in the medium term, and prices could even fall below pre-conflict levels." The departure of foreign companies contributed to production growth in almost all sectors of the Russian economy: "Expanding demand amid the departure of foreign companies and the increasing need for import substitution has created opportunities for growth in domestic production in virtually all sectors, from machine tool manufacturing to tourism."