Experts assessed the IMF forecast: unexpectedly believed in the success of the Russian economy

The International Monetary Fund (IMF) has improved its assessment of Russia’s economic development and predicts our country’s GDP growth by 0.3% this year and 2.1% next. Foreign financiers believe that Moscow is successfully overcoming Western sanctions pressure and has confidently embarked on the path out of the financial crisis. Domestic experts are not so optimistic and believe that Russia will face many more economic difficulties that can shake both the positions of industrial corporations and the interests of ordinary citizens.

Earlier, the World Bank presented a more negative outlook on the prospects for the development of the Russian economy. From the document it followed that the GDP of our country this year will decrease by 3.3%, and the transition to growth can be expected no earlier than the next twelve months, and even during this period the economic breakthrough will not exceed 1.6%. Domestic officials cited even more sad figures. According to the official expectations of the Ministry of Economic Development, in 2023 Russia’s GDP should shrink by 0.8%, and its growth is possible only in 2024-2025 – by about 2.6%. However, now, apparently, our financial institutions are ready to agree with foreign optimists. “The Russian economy is confidently overcoming the sanctions barriers of unfriendly countries. Further recovery will depend on the recovery of consumer demand, as well as measures to ensure the growth of corporate and consumer lending,” Maxim Reshetnikov’s department said in a statement.

Russian independent experts doubt the conclusions of international financial tycoons. In their opinion, our economy is yet to face the most severe consequences of Western sanctions pressure, which will continue to turn domestic business into a pariah of global capital.

Mikhail BELYAEV, financial analyst, candidate of economic sciences:

“Representatives of the Ministry of Economic Development, who prefer to make rather pessimistic forecasts regarding the prospects for the development of the domestic financial and industrial sector, can be understood. If their assumptions look too positive and eventually do not come true, then extremely serious claims will be made against them. It is better to play it safe right away and present rather unpopular scenarios. If the situation turns out to be more acceptable, then it will be possible to count on “praise and bonuses”.

In turn, the International Monetary Fund needs to maintain its reputation. On the one hand, the fund should focus on many businessmen, providing them with objective information on how the Russian economy is able to cope with the imposed sanctions barriers. On the other hand, the IMF is obliged to prevent excessive activity of the financial structures of our country. In general, it is worth noting that the updated forecast of the international organization is similar to the truth – Russia really demonstrates viability in the face of increased economic pressure from the West. However, there are also negative factors. It is worth paying attention to the depreciation of the ruble against the dollar and the euro. A special indicator can be considered the fall in the value of the Russian currency in comparison with the Chinese yuan. Since Beijing comes to the fore in external trade relations with Russia, our country should take a closer look at regulating the exchange rate of Chinese banknotes.

In this regard, one should not count on the prompt strengthening of domestic economic positions. If the Russian GDP grows, this is, of course, very good. However, the federal budget accounts for only a third of the domestic economy. The key rate of the Bank of Russia, which serves as the main instrument of the monetary policy of our state, continues to remain at a fairly high level of 7.5%, which hinders the growth of investment in real production. In such circumstances, domestic entrepreneurs should not count on a greenhouse environment. They need to be much more active in promoting their own business and protecting the interests of the workforce.”

Mark GOIKHMAN, chief analyst at TeleTrade:

“The fundamental improvement in the IMF forecast for the Russian economy — from minus to plus in terms of GDP growth — turned out to be much more optimistic than not only the assumptions of domestic economic departments, but also other international organizations. The World Bank’s unusual optimism stems from its assessment of the following factors. The fund assumes that if the expected deep recession of the Russian economy did not occur in 2022, then in 2023 the situation should improve. The IMF believes that the decline in our country’s income from energy exports due to the embargo and the “price ceiling” will not be as significant as previously expected. Basically, compensation for lost profits will occur due to the redirection of oil and gas supplies to other countries: from West to East – to India, China and Turkey. The fund believes that credit growth and Russian budget spending will support consumer and investment demand and stimulate domestic production.

However, such messages may be overly optimistic. Russia managed to stop the first shock from Western sanctions in 2022 with decisive, precise actions by the economic bloc, as well as high energy prices. However, given the inertia of economic processes, the sanctions will continue to have a detrimental effect on the domestic business sector. The impact on exports will be more pronounced in 2023. The price of natural gas due to energy savings, reduced demand and the use of alternative energy sources by world importers is significantly reduced. The redirection of oil flows from European to Asian direction occurs with very high discounts to market prices. Oil products, primarily fuel oil and diesel fuel, the embargo on the supply of which to Europe has been introduced since February 5, is unlikely to be redirected to other countries. The major Asian powers have seriously developed their own oil refining – most states themselves export petroleum products and, unlike crude oil, do not need to import fuel.

The development of domestic Russian production in various industries continues to be limited by the lack of materials, components, and equipment that previously came from Western countries. Our government notes the extremely low effective demand, caused by a decrease in the income of the population. The reduction in the drawdown of the domestic economy in the second half of 2022 was largely due to an increase in government orders, which was largely due to the allocation of budget funds for defense needs. Such maneuvers and at the moment really support the output and determine the growth of GDP, but do not stimulate the civil industrial sectors enough. Given these circumstances, the IMF’s assumptions seem overly optimistic. It is likely that Russian GDP will continue to decline this year. The lowest point of the crisis is far from passed. It may rather be about the degree of further contraction of our economy.”