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MOSCOW. – Russia’s economy may face multiple long-term challenges, but for now energy exports appear to be helping it ride out Western sanctions imposed over the offensive against Ukraine.
Moscow says inflation is easing and employment is virtually full, contradicting the predictions of a catastrophe from many financial experts.
The International Monetary Fund on Tuesday offered some support to Russia’s view, saying recession will be less severe than expected due to oil exports and relatively stable domestic demand.
The IMF forecast the Russian economy to contract just 3,4 percent over the whole year, after contracting 21, 8 percent during the second quarter at a quarterly annualised rate.
It was only in June that the IMF forecast an annual drop of six percent.
“The contraction in Russia’s economy is less severe than earlier projected, reflecting resilience in crude oil exports and in domestic demand with greater fiscal and monetary policy support and a restoration of confidence in the financial system,” the IMF’s latest World Economic Outlook report said.
President Vladimir Putin had stated in September that the economic situation in the country was “normalising” and that the worst was over after the series of economic penalties that followed the military operation launched against Ukraine on February.
Unemployment had fallen to its lowest level of 3,8 percent, Mr Putin said, with annual inflation down to 13.7 percent a year, after record highs during the spring when the early sanctions began to bite.
“We can consider that the impact of the first sanctions has passed, notably in the financial sector,” said Elina Ribakova, deputy head of the Institute of International Finance, a trade group for the global financial services industry.
The diplomatic and economic break with the West accelerated Moscow’s rapprochement with energy-hungry China, with which it shares a 4 000km border.
Almost excluded from the European market, Russian “companies have been forced to find alternatives in other markets, particularly in Asia and Turkey”, said Moscow State University economist Natalya Zubarevich.
Russia and China have already announced their intention to settle gas and electricity contracts in roubles and yuan, a triumph for the Kremlin’s efforts to take the US dollar out of the economy.
Last week’s OPEC+ oil cartel’s decision to slash output again, despite Washington’s call to open the taps, was also warmly greeted by Moscow, which benefits from rising crude prices. With the G7 rich nations club struggling to agree a ceiling price for Russian oil, a cap China and India appear reluctant to follow, Russia’s prospects do indeed appear to be improving. – AFP
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