By Alexander Marrow
MOSCOW (Reuters) – 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.
“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.
‘HIGHER DEFICITS’
The IMF’s 2023 growth forecast contrasts with that of the World Bank, which expects a 0.2% contraction. Analysts regularly polled by Reuters also see the economy shrinking this year.
The IMF said momentum carried over from the second half of last year was helping the economy, but it still expects some pressures to emerge this year.
“A sharp worsening in the terms of trade could lead to a significant decline in both the current account surplus and in fiscal revenues,” the IMF spokesperson said. “The latter means that the authorities will need to either curtail spending or find ways to finance noticeably higher deficits.”
Russia’s budget deficit stood at 2.4 trillion roubles ($29.22 billion) in the first quarter, data showed on Friday, as Moscow has spent heavily, while energy revenues have fallen so far this year.
Russia says its 2023 deficit will not exceed 2% of gross domestic product (GDP), but many analysts think it will surpass that level.
The current account surplus shrank by a little over 73% in the first quarter on an annual basis to $18.6 billion, the central bank said on Tuesday, hurt by the sharply lower energy revenues.
($1 = 82.1310 roubles)
(Reporting by Alexander Marrow; Editing by Gareth Jones)
