Regardless of damaging Western sanctions imposed on Moscow within the wake of the invasion of Ukraine, Russia’s economic system seems to be weathering the storm higher than anticipated because it advantages from excessive vitality costs, the IMF stated Tuesday.
The sanctions had been meant to sever Russia from the worldwide monetary system and choke off funds obtainable to Moscow to finance the conflict.
However the Worldwide Financial Fund’s newest World Financial Outlook upgraded Russia’s GDP estimate for this yr by a outstanding 2.5 share factors, though its economic system continues to be anticipated to contract by six %.
“That is nonetheless a reasonably sizable recession in Russia in 2022,” IMF chief economist Pierre-Olivier Gourinchas instructed AFP in an interview.
A key purpose that the downturn was not as unhealthy as anticipated was that “the Russian central financial institution and the Russian policymakers have been capable of stave off a banking panic or monetary meltdown when the sanctions had been first imposed,” he stated.
In the meantime, rising vitality costs are “offering an infinite quantity of revenues to the Russian economic system.”
After beginning the yr under $80 a barrel, oil costs spiked to almost $129 in March earlier than easing again to below $105 on Tuesday for Brent, the important thing European benchmark, whereas pure fuel costs are rising once more and approaching their current peak.
Whereas main economies together with the USA and China are slowing, the report stated, “Russia’s economic system is estimated to have contracted in the course of the second quarter by lower than beforehand projected, with crude oil and non-energy exports holding up higher than anticipated.”
In the meantime, regardless of the sanctions, Russia’s “home demand can be exhibiting some resilience” as a result of authorities assist.
However Gourinchas stated “there isn’t a rebound” forward for Russia. “In actual fact,” the IMF is “revising down the Russian development in 2023,” 1.2 factors decrease than the April forecast for a contraction of three.5 %.
The penalties already in place, in addition to new ones introduced by Europe, imply “the cumulative impact of the sanctions can be rising over time,” he stated.
The report signifies Europe is dealing with the brunt of the fallout from sanctions given its reliance on Russia for vitality. The state of affairs might worsen dramatically if Moscow cuts off fuel exports, and as soon as the European Union imposes a ban on Russian oil delivered by sea beginning subsequent yr.