The Bank of Russia is expected to hold its key rate at 16% on March 22, as it did in February after five rate hikes in a row before that, the poll of 13 analysts and economists showed.

Russia's economy rebounded in 2023 from contraction in 2022, but the growth relies heavily on state-funded arms and ammunition production for the conflict in Ukraine, masking problems that are hampering an improvement in Russians' living standards.

VTB Bank CEO Andrei Kostin predicted a gradual easing of borrowing costs in the second half of the year.

"I think the policy is balanced, the central bank is using traditional levers, it is monitoring it, and I think that as inflation stabilises, the rate will go down," he said on Russia 24 on Friday. "We forecast about 13% by the end of the year."

The median forecast of analysts polled in late February and early March suggested the economy will grow 1.6%, down slightly from last month's poll, with inflation ending the year at 5.3%, above the Bank of Russia's expected range between 4% and 4.5%.

Easing borrowing costs and bringing down inflation are key economic challenges for the Kremlin, which also has bold spending plans.

President Vladimir Putin outlined sweeping plans on Thursday to revitalise Russia's infrastructure over the next six years, pledging funds to help enhance the nation's economic performance just weeks before a presidential election he is sure to win.

Those pre-election promises are set to cost at least an additional 10 trillion roubles ($109.39 billion), according to Reuters calculations.

High budget spending was a key component of stubbornly high inflation in 2023, with the rouble's weakness and labour shortages also leading to price rises.

Annual inflation was 7.4% in 2023 and 11.9% in 2022.

Analysts expect the rouble, currently trading at about 91 per dollar, to weaken to 92.7 over the next year, an improvement on the prediction in the previous poll.

($1 = 91.4150 roubles)

(Reporting and polling by Alexander Marrow; additional reporting by Elena Fabrichnaya; Editing by Tomasz Janowski)

By Alexander Marrow