According to analysts at Barclays bank, Russia’s gross domestic product (GDP) is predicted to grow by 1.7% this year. Despite facing the pressure of Western sanctions related to the conflict in Ukraine, the Russian economy is benefiting from “active policy support”, which is driving a faster-than-expected economic recovery. This recovery is largely driven by domestic demand, supported by fiscal stimulus and lending growth.
However, the analysts also cautioned that there are still potential risks to growth in the near term. The recent key rate hike by the Bank of Russia, along with the possibility of further tightening of monetary policy, could negatively impact growth. Additionally, new sanctions and logistical challenges pose further downside risks. On August 15, the Russian regulator raised the key rate to 12% due to the weakening of the Russian ruble against major currencies such as the dollar and the euro. The Russian Finance Minister attributed this to changes in the country’s trade balance and strong demand for foreign currency during the summer holiday season.
Despite these risks, Russian Finance Minister Anton Siluanov remains optimistic about the country’s economic prospects. He predicted that the economy would grow by 2.5% by the end of 2023 and possibly even higher, fully recovering from the economic decline caused by the previous round of sanctions in 2022.
This positive outlook for Russia’s economy is supported by other reports as well. A recent World Bank report highlighted that Russia had moved into the world’s top five largest economies in 2022, based on purchasing power parity (PPP). This position surpasses the largest economy in the European Union, Germany. Both the World Bank and the International Monetary Fund (IMF) have raised their forecasts for Russia, citing strong trade and industrial production, as well as higher-than-expected energy revenues.
Overall, despite the challenges posed by Western sanctions and other risks, the Russian economy is showing resilience and is expected to continue its growth trajectory. The active policy support provided by the government, including fiscal stimulus and lending growth, is playing a crucial role in driving this recovery. As Russia’s economy expands, it is poised to solidify its position among the world’s leading economies.
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