Russia’s state-owned retail banking giant Sberbank has improved its forecast for Russian GDP growth this year to a bullish 3.8%, up from the previous 2.8%, according to the bank's financial statements released on August 8.

Sberbank’s forecast is one of the highest in the market and follows the Central Bank of Russia (CBR)’s recent upgrade to 3.4-3.5% forecast for this year in its last macroeconomic survey in July.

If the target is hit then Russia’s economy would growth this year even faster than last year’s result of 3.6% – itself a surprise result, given the extreme sanctions regime, labour shortage and high inflation.

Both the CBR and Sberbank have revised their inflation forecast for the end of the year upward, now both expect between 6.5% and 7.5%, compared to the earlier estimate of 4-5%.

The upgrade also comes at a time when several leading forecasters have been warning that the economy will cool as it has exhausted all the factors that have contributed to the military Keynesianism boost from the increased military spending. Indeed, CBR Governor Elvia Nabiullina warned that the current extremely high prime interest rates of 18% will slow growth and indeed, early indicators suggest that the slowdown may have already begun.

Growth will continue decelerating under mounting effects from stringent monetary conditions, the CBR said the same day.

"According to the forecast of the Bank of Russia, current GDP growth rates will continue slowing down under influence of rising effects from tough monetary conditions. The high consumer and investment demand will remain the main growth driver," the Central Bank said, reports TASS.

Consumer prices will grow by 6.5-7% in 2024, the regulator noted. In 2025, considering the monetary policy pursued, inflation will go down to 4-4.5% and will be close to 4% later on, the Bank of Russia informed.

In its revised projections, Sberbank also adjusted its expectations for lending growth within Russian banks. Retail lending is now expected to grow by 12-14% by the end of 2024, up from the previously forecasted 9-11%. Sberbank anticipates outperforming the market in this segment. Lending to legal entities is forecast to grow by 14-17%, an increase from the earlier projection of 12-15%, with the bank aiming to grow in line with the market.

Additionally, Sberbank has increased its forecast for the growth of funds held by legal entities in the banking sector to 4-6% from the previous 2-4%. For individual funds, the growth forecast has been revised to 26-29%, up from the earlier 24-26%. The bank expects the growth of corporate clients' funds to match the sector average and the retail deposit market growth to align with the sector level.

Sberbank also anticipates that the Bank of Russia's key rate will remain at the current level of 18% until the end of 2024.