Russian First Deputy Prime Minister Andrei Belousov outlined two strategic levers to curb overheating in the domestic economy: expanding production capacity and reining in demand. He articulated these ideas during an interview with Kommersant, framing them as complementary paths to stabilize growth without triggering a sharp downturn.
He warned that a deliberate effort to dampen demand could risk a hard landing, potentially halting growth in the first quarter of 2024 and ending the year with GDP growth in a modest range of about 0.5 to 1.5 percent. This restraint would require careful calibration to avoid a swoop in activity that could ripple through households and businesses alike.
Belousov noted that pursuing a hard landing could depress import-substitution investments, which would, in turn, push up prices for foreign goods inside Russia. Such a development would undermine efforts to diversify the economy and could erode purchasing power across the population, complicating policy aims for price stability and sustainable growth.
As a more moderate alternative, he advocated a soft exit strategy focused on supporting import substitution while steering Russia’s supply chains toward new markets that have emerged this year. He highlighted the importance of preserving those shifts, pointing to preferential loan programs for small and medium-sized enterprises launched at the initiative of Russia’s central bank. He also expressed hope that similar favorable conditions could be extended to exporters, helping them expand abroad and stabilize the trade balance.
In mid-December, the Central Bank of the Russian Federation raised the key interest rate to 16 percent for the fifth consecutive time. The central bank cited overheating pressures in the economy and rising inflation expectations among consumers and businesses as key drivers behind the decision, underscoring the persistent tension between growth momentum and price discipline.
Determining overheating in an economy occurs when growth outpaces sustainable capacity and productivity gains, creating inflationary pressure and imbalances that policymakers must address with a blend of monetary and real-sector measures. This dynamic is a core concern for economists and policymakers seeking a stable macroeconomic path amid external shocks and domestic adjustments.
Belousov underscored that overheating remains one of the foremost threats facing the Russian economy, signaling a broad concern about how rapid expansion could outstrip the economy’s ability to absorb it without triggering instability or rising costs for households. His analysis focuses on balancing growth with discipline, ensuring that policy tools are used to maintain momentum without provoking a sharp correction that would ripple through markets and the broader population.