Economic Forecast for 2025: Insights by Konstantin Yurchenko
In the realm of economics, Konstantin Yurchenko, a brainy economist with a PhD, threw down some hard-hitting predictions at the packed FINMARKET Forum in Yekaterinburg, Russia. let me fill you in on the juicy details of his presentation, dubbed the baseline.
The 20th century was a wild ride filled with innovation, but one innovation that carried some hefty weight was monetary policy. We've tossed around apocalyptic and post-apocalyptic predictions about future economic development, and as the smarty pants running the show - top Russian and worldwide economists - admitted, those forecasts showed some serious drama.
Monetary Policy: The Savior from Economic Crises
Fast-forward to April 2025, and theCB, the big cheese of Russia's central bank, didn't touch that key rate since October. That's because they've been keeping a keen eye on the economy and its future currents. You might be wondering, what's the big deal about tweaking a key rate? Well, it can make or break an economy.
Let me break it down: monetary policy has a distinctly countercyclical character, and here's why: the economy's like a roller coaster, but these fluctuations occur along a trajectory of potential growth. The availability of resources – labor, technology, materials, and productivity – determines the trajectory and pace of potential growth. A nation's economy can't jump significantly higher than its head, and pumping it up too much can lead to chaos, specifically an inflation surge and eventual economic downturn.
High inflation is the red flag that a country's economy is deviating upwards from its potential. However, the CB aims to keep inflation around 4%. As of 2025, it's on the higher side, but slowing down from a hefty 14% in 2024.
Overheating Economy: It's Cooling Down
Inflation isn't just about heated demand, rising costs, and other well-known factors. Another factor is companies' pricing expectations and the public's inflation expectations. Both are high but starting to decrease, causing the overall economy to cool down.
Of course, economic growth continues. Despite the economy overheating, expansion is still in motion, but the pace is becoming more balanced. Although the situation is still overheated, it's less hazardous than a few months ago, indicating that the CB's monetary policy efforts are on point and working.
Business Activity: Hot and Steamy but Stable
When analyzing enterprise assessments of business activity, the CB found that the business climate remained positive. The uncertainty in the economy has kept the current situation's assessment average, but enterprises' expectations are mostly positive, indicating that business activity will be maintained.
Investment Activity: Cooling Down but Still Brewing
Despite the growth in the economy, investment activity has slowed down slightly. This indicates that the overheating of the national economy is decreasing. Businesses may still invest, but their intentions are more restrained than in the previous years. They're financing new projects through various sources, both borrowed and owned funds, showing positive dynamics but a more subdued rate than before.
Consumer Activity: A Mixed Bag
Consumer activity always increases with a growing economy, but the increase has slowed down due to the key rate hike causing a significant increase in loan interest rates. While public catering and retail turnover remain high, consumer activity in durable goods like cars, TVs, and equipment is slowing down faster.
Savings Activity of the Population: Saving for a Rainy Day
The consumer sentiment index remains positive, indicating that a significant part of the population believes in future prospects and trusts the financial and banking system. Savings of the population are growing at higher rates, which is good news in terms of reducing inflation rates.
In other news, economists Evgeny Kogan highlights what investors should focus on during the era of global redivision, and don't miss out on the Zen.Dzen.News.email newsletter, Telegram, or VK for more updates!
Finance and business sectors are closely monitoring the effects of monetary policy as it plays a crucial role in addressing economic crises. In the context of Russia, the Central Bank's (CB) monetary policy has been instrumental in cooling down an overheating economy, particularly by managing inflation and regulation of investment activity.
