ALEXEI VEDEV: “DEMAND OUTSTRIPS SUPPLY AND SPEEDS UP PRICE INCREASES”

In his interview with the “Metro” publication, Alexei Vedev, Head of the Financial Studies Department of the Gaidar Institute listed factors leading to the “overheating of the economy.”

In the “What Trends Tell About” Bulletin, the Russian Central Bank’s analysts note that Russia has surpassed its potential growth level. GDP underpinned by demand on the part of the government has recovered in full with the demand exceeding the supply and prices still appreciating.

“The overheating of the economy means that the rate of unemployment falls below the normal level of 6%; it is currently equal to 3% with labor shortages being quite explicit. Normal capacity utilization is 80%, while now it is higher. This situation leads to wage growth and, consequently, to higher production costs and price rises. Demand outstrips supply and speeds up a rise in prices,” Alexei Vedev says.