The Russian economy in the third quarter was again in the zone of overheating

In other words, there is an imbalance between supply and demand. According to the regulator, the positive output gap will gradually decrease as production capacities recover and demand grows moderately. How do you do that? A problem with many unknowns.

It is clear that the aggregate demand for goods and services is growing faster than enterprises have time to expand production and increase output. Because factories are running at their limits (or face capacity shortages), they cannot meet all demand. This pushes prices up – hence there is stable inflation, which is not yet thinking of falling.

And in order to cool the overheated economy and return demand to balanced growth, the regulator is forced to keep the key rate high or raise it. In this case, the positive gap is gradually closed as demand cools or production capacity recovers.

But it turns out to be a kind of vicious circle. A high key rate does not allow the economy to develop. Again, demand for goods and services will outpace supply. Let’s go back to where we started the fight against overheating.

By the way, the domestic economy worked at its limit in 2024, when GDP growth amounted to 4.3%. And she needed a cold shower. But today, as you know, the situation is quite different.

In the mid-term forecast of the regulator. The Bank of Russia estimated GDP growth in the third quarter at 0.5%, according to the results of the fourth quarter it plans to increase to 1.5%. At the same time, the Central Bank expects that in the future (starting from 2028) GDP growth will correspond to the long-term growth rate of potential output: 1.5-2.5%.

As reported in the summary, in the third quarter, the current price growth on average increased to 8% in annual terms after 4.8% in the second quarter. Core inflation in this period was 6.2% after 4.5% in the previous one.

The summary also notes that domestic demand may remain elevated under the influence of continued high credit growth and strong fiscal stimulus. The long lag of productivity growth from wage dynamics may further support inflationary pressures. At the same time, a longer recovery of production capacity in certain industries may further limit the possibilities for supply expansion. As a result, a positive output gap may persist longer, adding to inflationary pressures

Chief researcher of the Institute of Economics of the Russian Academy of Sciences Igor Nikolaev does not believe that by the end of the third quarter we entered the zone of overheated Russian economy.

“Yes, during this period the situation was better than in the first half of the year and, especially, than in the first quarter of the year,” he said. Even today, however, the situation remains difficult. Strictly speaking, it's stagnation. For developed countries, it is within 1% of GDP growth, for developing countries – up to 2%. Minimal economic growth can hardly be considered overheating.

However, some progress in economic growth has occurred.

Revival in a slightly larger direction while maintaining low rates does not change the overall picture. The Ministry of Economic Development estimates an increase in GDP of 0.6%. We must not forget that this year we entered with a forecast of GDP growth of 1.3 percent. Current estimates of 0.5 to 1% are already revised. It is necessary to compare with the indicator according to which the budget for 2026 was adopted at the end of 2025. And he was 1.3 percent.

- And it certainly won't be achieved?

- Obviously. Even the official forecast of the Ministry of Economic Development gives 0.6%, which is significantly lower than the initial one. Growth in 2026 will be lower than expected.

In your opinion, with what indicators will we end this year?

We will stay in the positive growth zone, but this is minimal, tenths of a percent.

To balance supply and demand, you need to lower the key rate of the Central Bank. Almost all analysts say this. And the regulator again emphasizes the need to maintain its monetary policy. What does that mean?

Not everything is so simple and it is not necessary to overestimate the importance of this indicator. This is one of the factors, but there are other factors that affect the economic dynamics. Tax and administrative burden, level of economic uncertainty

Of course, a high key rate slows down the development of the economy, the availability of loans. The Central Bank can change the key, but even with a rigid PrEP, inflation remains elevated. The Bank of Russia revised its forecast and believes that inflation this year will be in the range of 7.1-7.6%. And we entered this year with a forecast of 4-4.5%. If the key rate is reduced now, inflation will be even higher.

It's not an easy choice. In 2027 we are entering with a fading rate of economic growth. This should be borne in mind and forecast indicators not only for the fourth quarter, but also for the first months of 2027.