IMF more upbeat on Russia despite structural constraints

MOSCOW: The International Monetary Fund issued Tuesday a more optimistic prognosis for Russia five months ahead of presidential elections but warned the authorities of structural constraints that jeopardise long-term economic prospects.

In its latest forecast, the IMF predicted the Russian economy will expand by 1.8 percent in 2017 and by 1.6 percent in 2018.

The figures are slightly higher than the previous prognosis in July of 1.4 percent growth in both 2017 and 2018.

"After two years of recession, economic activity in Russia is projected to expand by 1.8 percent in 2017, helped by stabilising oil prices, easing financial conditions, and improved confidence," the IMF said in its report.

"Over the medium term, however, growth is expected to remain about 1.5 percent, constrained by moderate oil prices, adverse demographics, and other structural impediments," it said.

Russian economy contracted by 2.8 percent in 2015 and 0.2 percent in 2016 as a result of sagging oil prices and economic sanctions imposed by western countries over Moscow's annexation of Crimea and meddling in Ukraine.

The recession was the longest since Vladimir Putin first came to power at the end of 1999 and crippled the economic wellbeing of ordinary Russians, especially after a plunge in the value of the Russian ruble slashed people's purchasing power.

Despite economic recovery, the number of people living below the poverty line has increased to 22 million people, or 15 percent of the population, a state official estimated in June.

In 2013, 10 percent of the population fell under this category.

Russia's central bank has tried to reinvigorate the economy by gradually reducing the key interest rate, with its latest cut in September -- the fourth this year -- putting it at 8.5 percent.

Putin, who is widely expected to run in the March 2018 elections for a fourth term, has himself pledged to reform Russia's economy and warned of the risks of stagnation.

However there are few signs these declarations are being put into practice.

The country is emerging from recession despite continuing difficulties, with several banks coming close to failure and airline VIM-AVIA collapsing in recent months.