MOSCOW: Russia may see a sharply wider budget deficit and a smaller current account surplus this year, while global isolation and lower energy revenues dampen its economic growth prospects for years to come, the International Monetary Fund said on Tuesday.
The IMF raised its 2023 Russia GDP forecast to growth of 0.7% from 0.3%, but lowered its 2024 prognosis to 1.3% from 2.1%, saying it also expected labour shortages and the exodus of Western companies to harm the country’s economy.
By 2027, the IMF expects Russia’s economic output to be 7% lower than forecasts made before Moscow sent tens of thousands of troops into Ukraine on Feb. 24, 2022, had suggested.
“An exodus of multinationals, loss in human capital, isolation from global financial markets, and impaired access to advanced technology goods and know-how will hamper the Russian economy,” an IMF spokesperson said.
The spokesperson said this has led the IMF to revise down its expectation for Russia’s medium-term potential growth to less than 1%, from 1-1/2% before the conflict began.
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“The extent of the medium-term decline, however, is highly uncertain,” the spokesperson added.
Rising military production and huge state spending have helped keep industry buzzing and softened the economic impact of the campaign in Ukraine and of Western sanctions.
An independent study last month suggested Russia’s middle class would shrink as social inequality grows, even if sanctions get relaxed. A return to pre-conflict levels of prosperity remains a long way off.
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