The Russian economy is now expected to suffer a less severe impact from international sanctions this year than previously estimated, the International Monetary Fund emphasized yesterday, Tuesday, adding that, conversely, European economies are being hit harder than anticipated.
Russia’s GDP is expected to contract by 6.0% in 2022, the IMF now forecasts, a figure significantly lower than the 8.5% it had projected in its previous estimates, released in April.
Nevertheless, it is indisputable that there will be a «major recession in Russia in 2022,» noted the IMF’s chief economist, Pierre-Olivier Gourans, noted during an interview with Agence France-Presse.
«The Russian economy is expected to contract less than previously forecast in the second quarter, with exports of crude oil and non-energy products remaining at a higher level than expected,» explains the Washington-based international financial institution in its report.
«Furthermore, domestic demand is showing some resilience thanks to efforts to mitigate the impact of sanctions on the domestic financial sector, and the labor market is being affected less than anticipated,» the Fund adds.
Following the Russian military’s invasion of Ukraine on February 24, Western countries took action against Moscow by announcing a barrage of sanctions designed to strangle its economy.
However, «the Russian central bank and policymakers» in Russia «were able to avoid a bank run or the collapse of the financial system» due to the sanctions that were imposed, Mr. Guransa acknowledged.
At the same time, the rise in oil prices provided «huge revenues for the Russian economy,» which helped Moscow cope, he added.
In 2023, the IMF also expects a recession of 3.5% in Russia, which is 1.2 percentage points less than it had previously forecast. However, «the cumulative impact of the sanctions will grow over time,» noted Pierre-Olivier Gouransa.
On the other hand, «the impact of the war on the major European economies was more negative than anticipated,» according to the Fund.
Growth forecasts for 2022 were revised downward for Germany (-0.9 points to 1.2%), France (-0.6 points to 2.3%), and Spain (-0.8 points to 4.0%).
This is due to «rising energy prices,» «declining consumer confidence,» as well as «the slowdown in industrial activity due to ongoing supply chain disruptions and rising raw material costs,» according to the IMF.
A potential complete cutoff of Russian natural gas supplies would «net» reduce growth in the eurozone in 2022 and 2023. It would effectively force European countries to implement rationing plans and would severely impact key industrial sectors.
