Russian policymakers believe the nation’s economy has adapted to the costs of the war on Ukraine and international sanctions and will continue to grow over the next few years.
(Bloomberg) — Russian policymakers believe the nation’s economy has adapted to the costs of the war on Ukraine and international sanctions and will continue to grow over the next few years.
The Economy Ministry sees Russian gross domestic product slowing to 2.3% over the next two years from 2.8% in 2023, according to its macroeconomic forecast through 2026, which was discussed at a government meeting led by Prime Minister Mikhail Mishustin Friday and seen by Bloomberg News. GDP growth is expected to further decline to 2.2% in 2026.
That pace is not far from the growth Russia experienced in the years before the Covid pandemic, and likely buttressed by the country’s ability to re-route trade in the face of international sanctions as well as a boost in military production and growing consumer demand supported by social spending and an increase in wages amid a labor shortage.
The forecast is the key document for budget planning during the years covered and has yet to be approved. The forecasts are largely in line with the upper end of the Bank of Russia’s outlook.
Russia’s budget remains under pressure from the financial drain from the war. Sanctions and other restrictions imposed by the US and its allies after Russia’s February 2022 invasion of Ukraine have hit the country’s earnings from energy exports. The ruble is the third-worst performing currency this year among emerging markets, and briefly weakened past 100 per dollar in August, prompting the government and the central bank to restart discussions about the need to return to capital controls.
Still, the Economy Ministry sees the average annual ruble rate not exceeding 87.4 per dollar during the next three years, inflation close to 4%, within the current target, and the average price for oil not dipping lower than $66.3 per barrel in the next three years, according to the document.
Russian government officials didn’t respond to a request for comment.
Russian industries recovered in April-June, growing year-on-year after minimal growth or declines in the previous three quarters, data from Russia’s federal statistics office showed. Manufacturing jumped 10.6% in the second quarter after mere 0.3% growth in January-March and a decline in the second half of 2022.
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