According to a forecast from the European rating agency Scope, the Russian economy is doing better than previously expected. Gross domestic product (GDP) is likely to shrink by only 0.8 percent this year.
At least that is the assumption of a new economic forecast, which was available on Tuesday from the Reuters news agency. So far, analysts had expected a slump of 4.0 percent, after a minus of 2.1 percent in 2022. Growth of 0.9 percent is expected for next year.
“The Russian economy will shrink again in 2023, albeit not as much as last year due to cheap energy prices and higher government spending,” write Scope analysts Jakob Suwalski and Brian Marly.
“But high budget deficits point to future challenges as the war in Ukraine and sanctions take their toll.” Asian economic powers such as China and India would open up alternative trade routes and markets for Russia. This weakens the effects of Western sanctions over the war in Ukraine and supports the economy.
Russia is experiencing high inflation
According to the study, high inflation will weigh on the economy. Consumer prices are expected to rise by an average of 6 percent this year. “Underlying price pressures are exacerbated by labor shortages due to the mobilization of working-age men for Ukraine’s war and accelerated emigration,” it said.
Scope expects a budget deficit of 3.8 percent of GDP this year. So far, the Russian government is only assuming a minus of 2 percent, which is about half as strong. The rating agency also expects new loans for next year in view of the weak growth and high military expenditure: the deficit should then amount to 2.8 percent. “Increasing dependence on the defense industry reduces the diversification of the Russian economy, which in turn affects the sustainability of economic growth,” it said.
Source: Krone
I am Wallace Jones, an experienced journalist. I specialize in writing for the world section of Today Times Live. With over a decade of experience, I have developed an eye for detail when it comes to reporting on local and global stories. My passion lies in uncovering the truth through my investigative skills and creating thought-provoking content that resonates with readers worldwide.
