The HNB Council said in a statement after a session on Wednesday that the available highly frequent data indicate an acceleration of real activity growth in Q1, even though the annual growth rate could go down compared to the previous quarter.
“In the remaining part of the year economic growth is expected to slow down, primarily due to unfavourable indirect and direct economic effects of the Russian invasion of Ukraine,” the HNB says, recalling that prices of energy products and other raw materials on the global market have increased and become more volatile.
In its baseline scenario, which envisages a relatively short duration of the Ukraine war and gradual normalisation of prices of energy products and raw materials on the global market, the HNB has reduced the expected real GDP growth in 2022 from the 4.1% projected last December to 3.2%.
With regard to inflation, the HNB says that it picked up in early 2022 due to growing prices of energy products and other raw materials as well as supply chain disruptions, resulting in higher prices of certain semi-finished products (such as semiconductors) and high freight rates.
For the entire year 2022 the HNB expects inflation to be at an average 5.4% (after 2.6% in 2021).
The strong recovery of economic activity last year resulted in a significant drop in the share of public debt in GDP, to 79.6% at the end of 2021, and in the first two months of 2022 a mild decrease in the deficit was reported compared to the same period of last year.
In the baseline scenario, the HNB expects the nominal budget balance to continue improving and the general government deficit to continue decreasing in 2022.
Due to energy price hikes the HNB expects 2022 to see a smaller surplus in the current and capital accounts than last year, but expects it to stay at a relatively high level of 5% of GDP.
The HNB Council today made a decision wrapping up the process of resolution of Sberbank d.d.
The Council also discussed current economic and financial trends and adopted a monetary policy projection for the period from 2022 to 2025. Also discussed was a report on the state of the banking system in 2021 and the Council adopted a decision on the HNB’s financial reports for 2021.
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