Russia’s GDP is expected to contract by 6.0% in 2022, the IMF now predicts, significantly less than the 8.5% it expected in its previous estimates, which it released in April.
The Russian economy is expected to be hit less than expected by international sanctions this year, the International Monetary Fund said, adding that, by contrast, European economies are being hit harder than expected.
Russia’s GDP is expected to contract by 6.0% in 2022, the IMF now predicts, significantly less than the 8.5% it expected in its previous estimates, which it released in April.
However, it is indisputable that there will be “Great Depression in Russia in 2022,” noted the IMF’s chief economist, Pierre-Olivier Gourance, during an interview with Agence France-Presse.
“The Russian economy is expected to contract less than forecast in the second quarter, exports of crude oil and non-energy products remain at a higher level than expected,” the Washington-based international financial institution explained in its report.
“Furthermore, domestic demand is showing some resilience thanks to the containment of the impact of sanctions on the domestic financial sector, and the labor market is less affected than anticipated,” the Fund adds.
Western countries, after the Russian military invaded Ukraine on February 24, moved against Moscow by announcing a barrage of sanctions designed to strangle its economy.
But “the Russian central bank and policy makers” in Russia “were able to avoid a banking panic or the collapse of the financial system” because of the sanctions imposed, Mr. Guransa acknowledged.
At the same time, rising oil prices provided “huge revenues to the Russian economy,” which helped Moscow cope, he added.
In 2023, the IMF also expects a 3.5% recession in Russia, 1.2 percentage points lower than previously forecast. However, “the cumulative impact of the sanctions will magnify over time,” noted Pierre-Olivier Guaranza.
On the other hand, “the effects of the war on the main European economies were more negative than anticipated,” according to the Fund.
Estimates for growth in 2022 were revised downwards for Germany (-0.9 points to 1.2%), France (-0.6 points to 2.3%) and Spain (-0.8 unit to 4.0%).
Which is due to “the increase in energy prices”, “the decline in consumer confidence”, as well as “the slowdown in industrial activity due to the ongoing obstacles in supply chains and the rise in the cost of raw materials”, judges the IMF.
A possible complete cut-off in Russian gas supplies would “clearly” reduce growth in the eurozone in 2022 and 2023. It would effectively force European countries to implement energy-rationing plans and hit key industrial sectors. .
RES-EMP
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