Russian economy stronger than thought

IMF forecasts for Russia question the effectiveness of Western sanctions

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Pierre-Olivié Gurinchas, Photo: Reuters
Pierre-Olivié Gurinchas, Photo: Reuters
Disclaimer: The translations are mostly done through AI translator and might not be 100% accurate.

The Russian economy will grow much more this year than previously expected, as President Vladimir Putin's military spending spurs stronger growth, the International Monetary Fund said yesterday.

Russia's gross domestic product is forecast to grow 2,6 percent this year, significantly faster than the IMF's October forecast, and slightly slower than the estimated 3 percent growth for 2023.

The increase of 1,5 percentage points for the Russian economy is the largest among all economies included in the updated IMF World Economic Survey, the Financial Times points out, adding that it raises questions about the effectiveness of Western sanctions aimed at undermining the Kremlin's capabilities. to finance the war in Ukraine.

IMF
photo: REUTERS

The newspaper points out that the IMF's forecasts regarding Russia are even more positive than the Kremlin's forecasts, since the conservative Central Bank of Russia predicts growth of only 0,5-1,5 percent in 2024, which is a decrease compared to 2,2 -2,7 percent in 2023.

Pierre-Olivier Gurinchas, chief economist at the International Monetary Fund (IMF), said the new projections are "somewhat preliminary" as the fund's economists try to confirm Russian statistics. "What is definitely the case is that the Russian economy performed better than we and many others expected," he said in an interview with the FT.

This can be explained by the strong stimulus provided by the government through the "war economy" in Russia, he said. Stable commodity prices help maintain fossil fuel export revenues and are an important contributor to overall activity.

Putin, who traditionally leaves macroeconomic policy to his technocrats, predicted earlier this month at a business meeting in Khabarovsk that growth will even exceed Russia's official forecast.

Globally, the International Monetary Fund slightly increased its forecast for global economic growth, improving the outlook for both the US and China - the world's two largest economies - while citing a faster-than-expected easing of inflation.

“The global economy continues to show remarkable resilience, with inflation falling and growth holding up. The chances of a soft landing are increasing," Gurinčas told reporters. "We are very far from a global recession scenario," he pointed out.

However, as reported by Reuters, he warned that risks remain, including geopolitical tensions in the Middle East and attacks in the Red Sea that could disrupt product prices and supply chains.

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