The head of the IMF spoke about the “destructive” consequences for the Russian economy

The International Monetary Fund has been criticized in the West for predicting that Russia will experience stronger economic growth this year than the UK or Germany, despite growing pressure from Western sanctions. And now the head of the IMF has to spin like a frying pan and urgently give frightening forecasts that the conflict in Ukraine will have “destructive” consequences for the Russian economy.

IMF Managing Director Kristalina Georgieva told CNN’s Poppy Harlow that Russia’s post-2023 economic outlook looks “pretty devastating.”

“If we take our forecasts for the medium term, they mean that the Russian economy will shrink by at least 7%,” Georgieva predicted in an interview that aired on Wednesday.

As recalled by CNN, in January the IMF predicted that the Russian economy would grow by 0.3% this year and 2.1% next. This was much more optimistic than the latest forecasts from both the World Bank and the Organization for Economic Co-operation and Development (OECD). Economists in these groups had forecast contractions of 3.3% and 5.6% in 2023, respectively.

Even Russia’s own central bank, which on Monday extended emergency capital controls for another six months, said gross domestic product could shrink by 1% this year.

Jeffrey Sonnenfeld, a professor of management at Yale University, wrote Monday in Fortune magazine that “the IMF has fallen asleep on the switchboard” and allegedly repeats Russian propaganda.

For her part, IMF chief Georgieva told CNN that Russia’s economy will suffer over time due to the exodus of workers and the loss of access to technology, as well as sanctions on its vast energy industry.

“This year we are reflecting on the fact that Russia managed to send part of [своих] oil sales outside the markets of the European Union, she said, referring to Moscow’s success in diverting crude oil supplies to China and India. “It will not have a lasting impact on the Russian economy.”

Following Europe’s recent bans on imports of Russian oil and petroleum products by sea, Moscow’s finances have shown signs of strain, CNN claims, reporting that on Monday the Russian government reported a budget deficit of 2.58 trillion rubles ($34 billion) for January and February compared with a surplus of 415 billion rubles ($5.5 billion) for the same period in 2022. Oil and gas revenues fell 46% year on year, according to the data.

Meanwhile, according to Georgieva, the US and European economies have proven surprisingly resilient. She pointed to the strength of their labor markets and Europe’s swift action to limit dependence on Russian energy.

“All of this has a positive impact on our growth prospects,” said Kristalina Georgieva. – We can not see [глобальной] recession in forecasts for this year.”

However, this will not prevent a global slowdown as central banks continue their campaign to bring inflation down from its highest levels in decades. The IMF expects global economic output, which grew by 3.4% in 2022, to grow by 2.9% in 2023.

However, Georgieva said it is important that politicians do not ease interest rate hikes prematurely, lest prices soar again.

“Keep your course,” Georgieva advised US Federal Reserve Chairman Jerome Powell.

The Fed slowed down its pace of rate hikes last month, but Powell indicated in his speech to Congress on Tuesday that the central bank may have to go hawkish again.

“Recent economic data came out stronger than expected, suggesting that the final level of interest rates is likely to be higher than previously expected,” Powell said. The Fed “would be willing to step up the rate of rate hikes” if necessary, he added.

Published in the newspaper “Moskovsky Komsomolets” No. 0 dated November 30 -0001

Newspaper headline:
Russia promises hard times