IMF Raises Russian Growth Forecast on Deficit-Fueled Government Spending

The International Monetary Fund raised its 2023 economic growth forecast for Russia on Tuesday, April 11, predicting that deficit-fueled government spending will help counteract the growing costs of its war in Ukraine.

But the Russian invasion is expected to have a significant impact over the medium term, with the IMF predicting the Russian economy will be about seven percent smaller than pre-war forecasts would have indicated.

The predictions were given by the IMF's deputy director in the Research Department, Petya Koeva Brooks, during a press briefing at the launch of the World Economic Outlook (WEO) report on Tuesday.

After contracting by 2.1 percent last year, the IMF now sees Russia's economy growing by 0.7 percent this year, up 0.4 percentage points from a previous forecast in January.

It is then forecast to grow by 1.3 percent in 2024, down 0.8 percentage points from the earlier forecast.

The IMF raised its forecast for 2023 on the "very strong source of revenues" for the economy from high energy prices last year and during the first half of this year, IMF chief economist Pierre-Olivier Gourinchas said at the press conference.

"In addition to that there was a very strong fiscal impulse in Russia in '22 and continuing into 2023," he said.

Much of the fiscal spending at the end of last year was related to military expenditures, with the effect expected to carry on into 2023, Koeva Brooks said.

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As oil revenues shrink and government spending continues, the IMF expects Russia's budget deficit will reach 6.2 percent of GDP this year, according to a spokesperson. This would be almost three times the size of last year's budget deficit.

Russia's current account surplus is also predicted to decline sharply to 3.6 percent of GDP this year from 10.3 percent a year earlier, due to much weaker terms of trade, lower energy volumes, and a recovery of imports, the spokesperson said.