The EC has improved its forecast for Russia’s GDP from a decrease of 0.9% to an increase of 2% in 2023

The European Commission has changed its forecast for Russia’s GDP to growth of 2%. The Russian economy is expected to grow by 1.6% annually in 2024 and 2025. In May, the EC predicted a fall in Russia’s GDP by 0.9% in 2023 and an increase of 1.3% in 2024. The EU GDP growth forecast has been reduced from 1% to 0.6%.

Autumn forecast published on website EK. Its authors believe that Russia has managed to redirect most of its exports, especially commodities, to China, India and other countries. But voluntary oil production cuts and “difficulties in replacing lost European gas markets” will limit export recovery in the second half of 2023. The slowdown in growth in subsequent years was attributed to weakening domestic demand, “production bottlenecks,” especially labor shortages, and “worsening economic growth potential.”

Inflation, according to the EC, at the end of the year will be 6%. It is expected that tight monetary policy and a slowing economy will lead to a decrease in inflation – to 4.6% in 2024 and to 4% in 2025. It is noted that in April, inflation fell to a three-year low, but then accelerated, this was facilitated by “high wage growth in a tight labor market and domestic demand supported by fiscal stimulus.”

The federal budget deficit, according to the EC forecast, will exceed 2% of GDP in 2023. Analysts expect defense spending to “rise sharply” in 2024, but the budget “will remain largely under control as the government has proven its ability to address the revenue challenge.” Oil prices are expected to have a positive impact on tax revenues.

The European Commission also improved its forecast for global economic growth in 2023 from 2.8% to 3.1% and worsened its forecast for 2024 from 3.1% to 2.9%. GDP growth in the European Union is expected to be 0.6%. In May, the EC expected growth of 1%. The figure for 2024 has been reduced from 1.7% to 1.3%. In the 20-nation euro zone, the forecast worsened from 1.1% to 0.6% in 2023 and from 1.6% to 1.2% in 2024. The euro area inflation forecast is improved from 5.8% to 5.6% in 2023, but worsened from 2.8% to 3.2% in 2023.

For the first time, the European Commission gave a forecast for the new EU candidate countries: Ukraine, Moldova, Bosnia and Herzegovina. The Ukrainian economy is expected to grow by 4.8% in 2023, 3.7% in 2024 and 6.1% in 2025.

How the ECB’s fight against rising prices reduced the size of the euro zone economy – in the Kommersant article “GDP fell along with inflation”.

Leonid Uvarchev