IMF expects Russian economy to grow by 0.3% in 2023

The International Monetary Fund (IMF) has significantly improved the forecast for Russia’s GDP in 2023 – instead of a decline of 2.3%, it is now expected to grow by 0.3%, follows from the January review of the organization. The fund’s forecast for global economic growth for the current year has been raised to 2.9% from 2.7% expected in October.

The estimates of IMF experts are beginning to converge with Russian forecasts, a representative of the Ministry of Economic Development commented on the updated forecast: the Russian economy is confidently overcoming the sanctions barriers of unfriendly countries. In 2023, further economic recovery will depend on the dynamics of consumer demand, as well as measures to ensure the growth of lending, both corporate and consumer, he added. The Ministry of Economy will update its estimates for the current and subsequent years in accordance with the regulations within the scenario conditions for forecasting socio-economic development.

According to the latest forecast of the Ministry of Economic Development, by the end of 2023, the Russian economy will decline by 0.8%. The Bank of Russia expects a decline in GDP in the range of 1-4%. Accounts Chamber auditor Dmitry Zaitsev told Vedomosti in December that the decline in the Russian economy in 2023 could be around 1%.

In 2022, the decline in Russia’s GDP, according to the IMF, amounted to 2.2%. At the same time, in October, the fund predicted a fall in the Russian economy by 3.4% for the year, in July – by 6%, and in April – by 8.5%. President Vladimir Putin at a meeting on economic issues in mid-January said that Russia’s GDP last year, according to preliminary estimates, fell by 2.5%, noting that some experts predicted a fall of 10, 15 and even 20%.

The logic of the IMF is clear: the fund improved its expectations for the dynamics of the global economy in 2023 and identified the driver countries – China and India, said Denis Popov, chief analyst at the PSB. Growth is expected to accelerate in China as anti-COVID restrictions are lifted, while India is at the peak of economic activity, he said. It is to these countries that Russian exports are now oriented, which means that there are objective grounds for improving the forecast for the dynamics of Russia’s GDP, the expert noted. At the same time, according to his baseline forecast, the Russian economy in 2023 will show a decline of 0.7%.

Moderately conservative assumptions are more likely to lead to a decrease in the physical volume of GDP in 2023, Dmitry Kulikov, director of the ACRA group of sovereign and regional ratings, agrees: there is an effect of a relatively high base in the first quarter of 2022, as well as expectations of a slight decrease in production in the oil and gas sector. In addition, the increase in government spending in 2023 is unlikely to exceed the growth in 2022, the expert added. Near-zero growth rates for the full year are possible with a noticeable excess of the plan for government spending or the emergence of new positive factors in the external environment, Kulikov believes.