Russia’s Economic Development Minister Alexey Ulyukayev expects positive GDP dynamics in 2016 and a 1.5-2.5% economic growth starting 2017.

“The working forecast is based on a 0.7% GDP growth, which is achievable this year. Starting 2017 we expect investment to grow, which will also trigger public capital investments, capital investment of private business and infrastructure companies. This may push GDP growth up to the rate of 1.5-2.5%,” the minister said when speaking at the State Duma (lower house of parliament) on Wednesday.

“It is very likely that the second quarter will see growth of industrial production and GDP,” he said speaking at the State Duma (lower house of parliament) on Wednesday. However, he added, the risks of narrowed consumer demand persist. “We witness a smaller retail sales decline compared with last year, 7% for the first two months of this year versus the first two months of last year,” he said.

“January still saw a contraction [of GDP], but it was smaller – 3-2.7%,” the minister said, adding that the dynamics of industrial production in Russia reversed its previous downward trend for the first time in a long period.

According to the minister, the positive GDP dynamics “will be backed by a further slowdown of capital outflow and inflation.”

Russian banking system

Ulyukayev also stressed that the Russian Central Bank has significant resources to reduce the key rate amid slowing inflation.

“For the last year’s inflation the key rate of 11% was probably a reasonable solution. Now it has dropped by more than 3 percentage points to the current rate of 7.9% (annual inflation), and the key rate – 11%. It is clear that there are substantial resources to make a step towards borrowers, lowering the key rate,” the official said.

According to him, the Russian banking system is stable and has excess liquidity.

“The banking system is in a steady state, provides significant lending growth, both capitalization and liquidity. For the first time in February, we have moved from a situation with a structural liquidity deficit to the situation of excess liquidity in the banking system,” he said.

“This suggests that people and businesses rely on the banking system, keep their deposits in it,” the minister said.