“Developing well enough”: why the IMF improved the forecast for the Russian economy for 2022

The International Monetary Fund has improved its forecast for the Russian economy for 2022.

According to the organization's estimate, the country's GDP will decline by 6% instead of the previously expected 8.5%, according to the IMF's World Economic Outlook report published on Tuesday, July 26.

In the context of large-scale sanctions, the Russian economy is still "developing quite well," the organization admitted.

As Pierre-Olivier Gurinsha, the Fund's chief economist, noted during a press conference, the measures taken at the beginning of the special operation in Ukraine to stabilize the financial sector proved to be effective.

“They helped support the country's economy.

As for the external sector, in the first half of this year, Russia received very high export earnings through the sale of oil and gas to other countries of the world, in particular to Europe and other regions.

And it also helped to substantiate the (revised July. -

) economic forecast, ”TASS quotes Gurinsh as saying.

According to the IMF, the weakening of the Russian labor market turned out to be not as serious as initially thought.

At the same time, domestic demand is showing some resilience due to the restrained impact of sanctions on the financial sector.

Earlier, a similar trend was recorded by S&P Global economists.

According to the company's estimates, in June the PMI in the manufacturing and services sector of Russia exceeded the critical level of 50 points and reached 50.4 points.

This level indicates the beginning of a positive trend in the economy.

“The latest index values ​​indicate a resumption of production growth in the private sector after a three-month decline… Demand from clients in the Russian private sector strengthened in June.

Manufacturers and service providers recorded an increase in new orders, with total new sales growing at the fastest pace since May 2021,” S&P Global said in a study.

On July 22, the Central Bank of Russia also improved its macroeconomic forecast.

If back in April the Central Bank expected the country's GDP to fall by 8-10% in 2022 and inflation to accelerate to 18-23%, now the regulator estimates the expected economic downturn at only 4-6%, and consumer price growth at 12-15% at the end of 12 months.

As the head of the Finance and Economics department at the Institute of Contemporary Development Nikita Maslennikov told RT, recently the economic situation in Russia has really shifted for the better.

At the same time, according to the specialist, many risks still remain, and the decline in GDP may be longer, although not so deep.

“We still need to stimulate consumer demand, and in this regard, the Central Bank will need to take action.

The Central Bank has already significantly reduced the key rate and will now take a wait-and-see attitude so as not to provoke a new increase in inflation.

At the same time, it is necessary to maintain supply on the market, and this requires structural changes,” Maslennikov added.

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It should be noted that the IMF slightly revised its forecast for the Russian economy for the next year, but for the worse.

According to the calculations of the fund's specialists, in 2023 the country's GDP will decrease by 3.5%, and not by 2.3%, as previously expected.

The adaptation of the Russian economy to the new conditions will take time, and it may take three to five years for the country to return to the indicators of 2021.

This opinion was shared with RT by Georgy Ostapkovich, director of the Center for Market Research at the Institute for Statistical Research and the Economics of Knowledge at the Higher School of Economics.

According to him, in the next few years, one of the main challenges for Russia will be the full launch of import substitution.

“Sanctions do not hit us as hard as the exit of foreign business.

For example, many car brands left, which is why our car production sank by 80-90%.

The exit of high-tech brands remains the most painful, and the government faces a serious task to replace them with its own forces.

Here, either you need to turn on the full power of import substitution, or drastically change logistics from West to East so that new partners can qualitatively replace Western products, ”explained Ostapkovich.

Global Uncertainty

At the same time, the International Monetary Fund again worsened its forecast for the global economy for the next two years.

According to the organization, in 2022, global GDP will increase by 3.2%, and in 2023 by 2.9%.

Back in April, the fund expected an increase of 3.6% annually.

“Global economic growth is slowing amid a bleak and more uncertain outlook… Higher-than-expected inflation (especially in the US and major European countries) is pushing global financial conditions to tighten.

The economic slowdown in China turned out to be more significant than expected due to outbreaks of COVID-19 and self-isolation measures,” said Pierre-Olivier Gourinsha.

Moreover, the expert did not rule out that the global economy could once again be on the verge of a recession.

One of the key risks for this, the fund considers a possible cessation of gas supplies from Russia to Europe.

In addition, the organization fears new outbreaks of COVID-19 in China, a longer persistence of global inflation at a high level, as well as an increase in the cost of food and energy, which could threaten social unrest in a number of countries.

At the same time, raising interest rates risks turning into problems with debt repayment in developing countries, the IMF suggested.

“The situation in the global economy is definitely worse now than during the pandemic.

This is due to a certain trend of a synchronous slowdown in global economic growth, which can be seen in the EU, the US, and even China.

Plus, continuing high inflation plays its role,” Nikita Maslennikov is sure.

According to him, partly the rise in world prices for goods and services is associated with the policy of printing money and low interest rates, which have been pursued by world regulators in recent years.

Now the shock from the record rise in energy prices against the backdrop of anti-Russian sanctions by the West has been added to this, the specialist added.

“To cope with rising prices, central banks are increasing interest rates, but when monetary policy tightens, business activity is reduced and the likelihood of falling into a recession is even greater.

These risks exist for both the EU and the US.

The world economy, given the current realities, may fall into a major economic crisis of the type of 2008-2009,” Maslennikov concluded.