MOSCOW: Russia’s economy ministry revised higher on Friday its 2023 gross domestic product (GDP) forecast to 1.2% growth from a 0.8% contraction, but lowered its forecast for 2024, mirroring a wider trend that envisages more sluggish longer term prospects.

The International Monetary Fund this week also raised its forecast for Russia’s 2023 economic growth, but said the country may see a sharply wider budget deficit and a smaller current account surplus this year. It said Russia’s global isolation and lower energy revenues could harm its growth potential for years.

The economy ministry forecast GDP growth of 2% in 2024, down from 2.6% when it last provided macroeconomic forecasts in the autumn.

Russia’s economy defied early expectations for a double-digit economic contraction in 2022, in forecasts made soon after Moscow sent troops into Ukraine in February of that year, but a return to prosperity remains a long way off as the government directs more spending towards the military.

The Russian economy shrank 2.1% in 2022. Before Moscow began what it calls a “special military operation” in Ukraine, the government had expected 3% growth.

The ministry raised its forecasts for retail sales, real wages and real disposable incomes in 2023, but lowered them slightly for 2024. Unemployment is set to remain at a record low of 3.5% through 2026, the ministry estimates.

Russia’s current account surplus is shrinking sharply, down around 73% in the first quarter of 2023. Robust oil and gas exports had combined with collapsing imports to push the surplus to a record high in 2022.

The ministry almost halved its forecast for the current account surplus in 2023 to $86.6 billion from $157.6 billion previously and slashed its trade balance forecast by around a third to $152.1 billion.

Economists from the Institute of International Finance said Russia had a large “excess” current account surplus in 2022, with a surplus above and beyond the normal seasonal path in 2021 and 2022.