I Did Not Expect This

While the predictions of the implosion of the Russian economy under sanctions has always seemed to be a bit exaggerated, I am surprised that the International Monetary Fund's prediction for the Russian economy is more optimistic than that of the Bank of Russia.

It's not great numbers,  0.3% GDP growth in 2023, but it's much better than that of the BoR (-4.0%) and the Russian Ministry of Economic Development (-0.8%).

It's also better than the predicted numbers for Germany (0.1%) and the UK (-0.6%).

I'm generally dubious of the Russian numbers, there are strong inducements to for them to be overly optimistic, but I am more sanguine about the IMF numbers, because their incentives run in the opposite direction.

The International Monetary Fund (IMF) has released one of the most optimistic forecasts for Russia’s economic growth for 2023, predicting 0.3% for this year. The reason? Oil exports will defy sanctions, although exports will fall below the pre-war levels.

International economic institutions are now expressing more optimism than the Russian government about Russia's economy. In its outlook published on January 30, the IMF upgraded its forecast for Russian GDP growth to 0.3% in 2023, up from the previous October forecast of a 2.3% contraction.

The IMF's new outlook on the global economy is also much more positive, anticipating 2.9% growth due to "unexpectedly stable" dynamics, reports The Bell. For Russia, the IMF predicts even higher growth of 2.1% in 2024. This optimistic forecast is credited to the stability of Russia's oil exports and the redirection of trade from sanctioned to non-sanctioned countries.

The IMF's forecast is even more upbeat than the notoriously conservative Central Bank of Russia (CBR) and the cautious Ministry of Economic Development, which predict a decline of 4% and 0.8% respectively in 2023. The IMF's prediction requires a quarter-on-quarter growth of 0.4% for the entire 2023.

Other major economies are also expected to show growth in 2023, but Russia's economic growth is predicted to outpace both Germany and the UK, despite the crushing sanctions, and is far, far better than the 15% contraction for Russia in 2022 predicted at the start of the war.

It's clear that the sanctions are not working as well as, expected.

This is not a surprise. Russia still has markets for its oil, the means to deliver that oil to customers, and there is a stimulative effect from it's arms industry, which is well positioned for a surge by virtue of the nature of the war in the Ukraine and the relative simplicity of the weapons involved.