The International Monetary Fund (IMF) upwardly revised its GDP estimates for Russia in 2023, despite ongoing sanctions against the country by the United States. A report released Tuesday predicts Russian GDP will increase by 0.7 percent, a slightly more positive outlook than that of the organization’s January report and a significant improvement since the October report predicted a decline of 2.3 percent.
IMF officials pointed to two factors: energy costs and fiscal stimulus.
“There was a very strong source of revenues for the Russian economy from energy exports—very, very high energy prices—and that helped support economic activity,” said Pierre-Olivier Gourinchas, IMF director of research, at a press briefing on Tuesday. “In addition to that, there was a very strong fiscal impulse in Russia in 2022 and continuing into 2023.”
Officials stressed the IMF’s downward revision for Russian GDP in 2024, which the organization believes will be brought about by falling energy prices. The report predicts crude oil prices to fall by about 24 percent in 2023 and a further 5.8 percent in 2024, averaging $68.90 per barrel for 2024.
According to the organization, energy prices will fall as global monetary policies remain hawkish and demand declines as governments begin withdrawing assistive financing.
“Global interest rates will stay elevated for longer than expected,” the report stated. “Governments are on average expected to gradually withdraw fiscal policy support … by scaling back packages designed to shield households and firms from the effects of the fuel and energy price spikes in 2022.”
While Russia is expected to end the year with positive growth, Gourinchas pointed out potential challenges that Russia faced throughout 2022, a year in which the Russian economy declined by 2.1 percent. “We’ve seen that the price of oil sold by Russia in some cases has been substantially marked down compared to other oil indices,” he said.
Banking on Lower Oil Prices
The IMF downwardly revised its Russian GDP estimate for 2024 by 0.8 percent, though the organization is still predicting an economic expansion of 1.3 percent. The research director remains pessimistic about the country’s long-term outlook.“We anticipate that the [Russian] revenues will actually be coming down,” Gourinchas said. “That will make the fiscal situation a little bit more complicated.”
However, the IMF prediction hinges solely on falling oil prices, an outcome that some experts deem unlikely.
Harris Kupperman, founder of Praetorian Capital, pointed to the ongoing supply shortage in the energy sector, exacerbated by the recent pledge from the Organization of the Petroleum Exporting Countries (OPEC) to cut production by 500,000 barrels per day. Kupperman sees prices in excess of $100 as a more likely target than the IMF’s estimate in the upper $60 level.
“With what we calculate is six to eight million barrel per day supply deficit following OPEC+ cuts, it seems inconceivable that oil could decline as they predict without renewed lockdowns,” he told The Epoch Times. “We believe a return to triple digits is inevitable.”
