Categories: World

IMF: Russia’s economy is more resistant to sanctions than expected

IMF: Russia’s economy is more resistant to sanctions than expected

The Russian economy is now expected to suffer a less severe impact from international sanctions this year than previously estimated, the International Monetary Fund said yesterday, adding that, on the other hand, European economies are being hit harder than expected.

Russia’s GDP is expected to contract by 6.0% in 2022, the IMF now predicts, significantly less than the 8.5% it expected in its previous estimates, which it released in April.

However, it is indisputable that there will be a “major recession in Russia in 2022”, noted the IMF’s chief economist, Pierre-Olivier Gourance, during an interview with Agence France-Presse.

“The Russian economy is expected to contract less than forecast in the second quarter, exports of crude oil and non-energy products remain at a higher level than expected,” the Washington-based international financial institution explained in its report.

“Furthermore, domestic demand is showing some resilience thanks to the containment of the impact of sanctions on the domestic financial sector, and the labor market is less affected than anticipated,” the Fund adds.

Western countries, after the Russian military invaded Ukraine on February 24, moved against Moscow by announcing a barrage of sanctions designed to strangle its economy.

But “the Russian central bank and policy makers” in Russia “were able to avoid a banking panic or the collapse of the financial system” because of the sanctions imposed, Mr Guransa acknowledged.

At the same time, rising oil prices provided “huge revenues to the Russian economy”, which helped Moscow cope, he added.

In 2023, the IMF also expects a 3.5% recession in Russia, 1.2 percentage points lower than previously forecast. However, “the cumulative impact of the sanctions will magnify over time,” noted Pierre-Olivier Guaranza.

On the other hand, “the effects of the war on the main European economies were more negative than anticipated,” according to the Fund.

Growth estimates in 2022 were revised downwards for Germany (–0.9 points to 1.2%), France (–0.6 points to 2.3%) and Spain (–0.8 unit to 4.0%).

Which is due to “rising energy prices”, “decreasing consumer confidence”, as well as “a slowdown in industrial activity due to continued disruptions in supply chains and rising raw material costs”, says the IMF.

A possible complete cut-off in Russian gas supplies would “clearly” reduce growth in the eurozone in 2022 and 2023. It would effectively force European countries to implement energy-rationing plans and hit key industrial sectors. .

Source: AMPE

Source: Capital