The IMF raised its forecasts for the global and Russian economies

The International Monetary Fund has updated its forecast for the development of the global economy, improving expectations: the slowdown in growth rates in 2024 will be moderate, despite the active struggle of the whole world with inflation. The fund associates the increase in estimates – and it affected several large economies at once – with higher indicators last year, in fact admitting that the IMF’s previous pessimism did not justify itself. The forecast for the Russian Federation for this year was adjusted the most – from 1.1% to 2.6%, which is significantly higher than the estimates of both Russian and international analysts: the fund probably considers it possible to maintain the significant impact of the budget stimulus on the Russian economy.

Global economic growth will be 3.1% this year and 3.2% next year, according to the updated macro forecast of the International Monetary Fund (IMF). The forecast for this year was slightly improved – it is 0.2 percentage points (pp) higher than the fund’s October estimates (forecasts for the USA, China and large developing countries, including the Russian Federation, were increased).

Taking into account the expected decline in global inflation, we are talking about a “soft slowdown” of the world economy, the fund notes – let us remember that this scenario a year ago was considered the most positive of the possible, but not very likely against the backdrop of the continued rise in rates by the US Federal Reserve and the ECB.

Slower growth than before the pandemic is the result of a combination of tighter monetary and fiscal policies and weak productivity growth. World trade will not grow as before (its growth rate will be 3.3–3.6% versus 4.9%) – it is affected by the fragmentation of supply chains, as well as sanctions and other trade restrictions (their number has increased over the year more than 6 thousand). The slowdown in growth will cause a decline in commodity prices, the IMF expects – the average price of the oil basket should decrease this year by 2.3% (to $79.1 per barrel), in 2025 – by 4.8%, to $75.3 per barrel barrel. Rates will begin to decline only in the second half of the year, and the target levels of most regulators can only be achieved in 2025.

The revision of the forecast for 2024 affected a number of large countries: in the United States, growth rates are expected to slow from 2.5% in 2023 to 2.1% in 2024 and 1.7% in 2025, but the estimate for 2024, increased by 0.6 percentage points. In the case of the euro area, the effect is the opposite – weaker growth at the end of 2023 (by only 0.5%, with a decline in the GDP of the bloc’s largest economy, Germany, by 0.3%) . For China, the estimate for this year was raised by 0.4 percentage points, but growth is expected to slow from 5.2% in 2023 to 4.6% and 4.1% in 2024–2025, respectively.

The most significant revision was made for the Russian Federation – the forecast for 2024 was raised by 1.5 percentage points, to 2.6%, this estimate is higher than most forecasts of both Russian and international analysts, who expect a noticeable slowdown in growth this year .

Thus, in mid-January, the World Bank estimated the dynamics of Russia’s GDP at 1.3% this year and 0.9% in 2025. The OECD at the end of November gave an estimate for 2024 at 1.1%, the Eurasian Development Bank at the end of the year – at 1.5%. The mid-term forecast of the Bank of Russia at the end of October assumes growth in the range of 0.5–1.5%.

The fund itself attributes the revision to better-than-expected growth in 2023 due to high military spending and private consumption supported by rising wages in a tight labor market. The IMF expects a sharp slowdown in growth in the Russian Federation only in 2025 – to 1.1%, but this estimate has also been revised upward by 0.1 percentage points. The IMF estimates the growth of the Russian economy in 2023 at 3%; in the Ministry of Economy, we recall, it is estimated higher, at 3.5%, allowing for clarification and up to 4% – according to the head of the department Maxim Reshetnikov, in the coming years, GDP growth “will be more than 2% per year.”

In 2023, the IMF significantly underestimated the prospects for the Russian economy, probably not factoring into the forecast the impact of a significant fiscal stimulus, as well as the specifics of its distribution in the economy in specific external conditions (with restrictions on both imports and exports, which could additionally support the growth of industrial production ). Back in the middle of the year, the fund expected GDP growth in 2023 by only 1.5%, this year by 1.3%.

“The IMF forecast looks very optimistic, the revision was rather unexpected for us, although, in principle, in the last two years we have seen cases when the fund was more optimistic, for example, the Russian market,” notes the chief economist for Russia and the CIS+ at Renaissance Capital. Sofia Donets. She herself does not share the IMF’s optimism, estimating the growth of the Russian economy at only 1% in 2024. The fund’s higher valuation could, in her opinion, be due to the IMF taking a more positive view of the role of fiscal stimulus in 2024.

However, the IMF’s positive forecasts for Russia are not necessarily good news now – they may also become a reason to discuss new sanctions, she notes.

According to Dmitry Polevoy, Investment Director of Astra Asset Management JSC, the updated forecasts reinforce the dominant thesis in the markets that the largest developed economies will be able to avoid a recession in 2024, and developing ones will be able to maintain acceptable growth rates. In other words, a “soft landing” awaits us. Forecasts for Russia, which cause justified skepticism (the consensus forecast for 2024 is 1.5% growth), will look quite normal if we take into account the IMF’s underestimated estimates (3%) for 2023, with official promises of 3.5–4%, notes Mr. Field. The risks of a recession in the Russian Federation are low, but due to a reversal in the fiscal and credit impulse and the Central Bank’s tough policies, growth will be closer to 1–1.5%, the economist expects – this will allow the Central Bank to gradually regain control over inflation from the end of the second quarter of 2024 start cutting rates. “Sensitivity to fluctuations in commodity prices will be reduced due to the fiscal rule – this is a big plus, as a result, the ruble should be less volatile, although there will be no return to the levels of exchange rate volatility before the start of the military operation in Ukraine,” he believes.

Tatiana Edovina