The IMF announced the high resilience of the Russian economy to sanctions

The Russian economy has proved more resilient to sanctions than expected, according to an April report International Monetary Fund (IMF) on the economic situation in Europe.

“The Russian economy has so far proved to be more resilient to sanctions than many observers initially expected,” the document says.

IMF analysts note that after a sharp fall in the second quarter of last year, the Russian economy was able to recover significantly in the second half of the year, reducing the fall in GDP to 2.1% at the end of the year. A significant improvement in the terms of trade and stable volumes of oil exports led to a record increase in Russian oil and gas revenues, supporting the economy in 2022.

“Russia’s ability to redirect crude oil exports from countries that have joined the sanctions to countries that have not imposed sanctions is supported by independent anecdotal evidence, while gas export revenues were also high, despite a sharp drop in supply volumes,” experts say.

The growth of the economy was also significantly affected by the increase in defense spending in the second half of the year, the report says. At the same time, the recovery continued in the first quarter of this year, in 2023 the economy is expected to grow by 0.7%.

April IMF forecast for Russia’s GDP by 0.4 p.p. exceeds organization’s January forecast. In October, the organization expected a decline in Russian GDP by 2.3% in 2023. Next year, declining energy prices will put pressure on the growth of the Russian economy, so by the end of 2024, Russian GDP will grow by only 1.3%, which is 0, 8 pp below the organization’s January forecast.

On April 14, Minister of Economic Development Maxim Reshetnikov announced that the department improved forecast for the Russian economy in 2023 from a decline of 0.8% (in the September forecast) to growth of 1.2%. The main contribution to economic growth, according to Reshetnikov, will be made by the recovery of consumer demand after the recession in 2022. The expected growth in household incomes will contribute to this, the minister noted. Demand will recover both as the population’s propensity to save normalizes and as consumer lending grows, he added.

In February, the Central Bank improved its assessment of Russia’s GDP in 2023. Instead of a decline of 1–4%, the Bank of Russia expects dynamics in the range from -1% to +1%.