- This content was produced in Russia, where the law restricts coverage of Russian military operations in Ukraine
MOSCOW, April 14 (Reuters) – Russia’s economy ministry on Friday revised upwards its forecast for 2023 gross domestic product (GDP) to 1.2% growth from a 0.8% contraction, but lowered its forecast for 2024, reflecting a broader trend that provides longer sluggish maturity prospects.
The International Monetary Fund also this week raised its forecast for Russia’s economic growth in 2023, but said the country could see a much larger budget deficit and smaller current account surplus this year. Russia’s global isolation and lower energy revenues could hamper its growth potential for years.
The Economy Ministry forecast GDP growth of 2% in 2024, up from 2.6% when it last issued macroeconomic forecasts in the autumn.
Russia’s economy defied early expectations of a double-digit contraction in 2022, in forecasts coming soon after Moscow deployed troops to Ukraine in February this year, but a return to prosperity remains a long way off as the government allocates more spending to the military.
The Russian economy shrank by 2.1% in 2022. Before Moscow launched a so-called “special military operation” in Ukraine, the government had expected growth of 3%.
The ministry raised its forecasts for retail sales, real wages and real disposable income in 2023, but cut them slightly for 2024. Unemployment is expected to remain at a record low of 3.5% through 2026, the ministry estimates.
SHRINKING EXCESS
Russia’s current account surplus is shrinking sharply, falling by around 73% in the first quarter of 2023. Robust oil and gas exports combined with slumping imports had pushed 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 a previous $157.6 billion and cut its trade balance forecast by around a third to $152.1 billion.
Economists at the Institute of International Finance said Russia recorded a large “excess” current account surplus in 2022, with a surplus exceeding the normal seasonal path in 2021 and 2022.
“This amounts to a windfall of about 13% of GDP, which helped inject liquidity into the Russian financial system, which in turn buffered growth,” the IIF said in a report published on Thursday.
“That windfall ended in 2023, with Russia’s current account surplus below ‘normal’, likely one reason why the ruble has weakened year-to-date,” he added.
The ruble is down about 10% year-to-date, the third-worst performing global currency this year, struggling under the weight of a Western oil price ceiling and shrinking export earnings.
The Economy Ministry lowered its forecast for the ruble exchange rate to 76.5 per dollar in 2023 from 68.3 in the previous forecast and to 76.8 from 70.9 in 2024.
Reuters reporting; Writing from Alexander Marrow Editing by Gareth Jones
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