Russian economy exceeds expectations: IMF
The latest assessment raises Russia's GDP projection for 2022 due to high oil costs.
Despite severe Western sanctions put on Moscow in the aftermath of the war in Ukraine, the IMF stated on Tuesday that Russia's economy looks to be weathering the storm better than predicted, owing to high energy prices.
The sanctions were designed to cut Russia off from the global banking system and limit Moscow's ability to pay for the war.
However, the International Monetary Fund's new World Economic Outlook raised Russia's GDP projection for this year by a surprising 2.5 percentage points, despite the fact that the country's economy is still expected to fall by 6%.
“That’s still a fairly sizable recession in Russia in 2022,” IMF chief economist Pierre-Olivier Gourinchas told AFP in an interview.
A key reason that the downturn was not as bad as expected was that “the Russian central bank and the Russian policymakers have been able to stave off a banking panic or financial meltdown when the sanctions were first imposed,” he said.
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Meanwhile, rising energy prices are “providing an enormous amount of revenues to the Russian economy.”
According to the research, Europe is bearing the brunt of the sanctions' consequences due to its reliance on Russia for energy. The situation might deteriorate rapidly if Moscow cuts off gas supplies and the European Union bans Russian oil shipped by sea beginning next year.
While major economies including the United States and China are slowing, the report said, “Russia’s economy is estimated to have contracted during the second quarter by less than previously projected, with crude oil and non-energy exports holding up better than expected.”
Meanwhile, despite the sanctions, Russia's "domestic demand has also demonstrated some resilience" as a result of government support.
But Gourinchas said “there is no rebound” ahead for Russia. “In fact,” the IMF is “revising down the Russian growth in 2023,” 1.2 points lower than the April forecast for a contraction of 3.5%.
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The existing fines, along with additional ones issued by Europe, mean that "the cumulative effect of the sanctions is also growing over time," he said.
Because of its reliance on Russia for energy, Europe is experiencing the brunt of the sanctions' impacts, according to the study. If Moscow cuts off gas supplies and the European Union prohibits Russian oil delivered by sea beginning next year, the situation might quickly deteriorate.
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