IMF improves outlook on Russia's economy

IMF improves outlook on Russia's economy

The International Monetary Fund (IMF) has improved the outlook for the Russian economy. In April 2016, the IMF said that Russia’s economy could decline by an additional 1.8% this year; in May it improved the forecast on Russia’s GDP decline to -1.5% in 2016.

According to new data, the Fund expects the Russian economy will decline by 1.2% in the current year, and will grow by 1% in 2017.

Earlier, the director of the International Monetary Fund (IMF) Christine Lagarde said that in 2016, Russian economy will continue to "shrink".

Current adjustments were made on the basis of a regular annual review of the Russian economy, conducted by specialists of the Fund in accordance with the statutory requirements of the organization. These results were discussed in the end of June at a meeting of the IMF Board of Directors.

The Fund's forecast for 2017 remains the same as in May.

The Russian authorities are even more optimistic. According to an official forecast of the Russian Ministry of Economic Development, the Russian economy will decline by 0.2% in 2016. 

The Russian Deputy Finance Minister Maxim Oreshkin earlier said that the ministry does not rule out a growth of GDP in 2016 if positive factors of the foreign economic situation remain.

An associate professor of Stock Markets and Financial Engineering of RANEPA, Vasiliy Yakimkin, speaking with a correspondent of Vestnik Kavkaza, explained that the stabilization of the situation in the Russian economy is an objective fact and international financial institutions cannot ignore it. "Certain sectors of our economy are moving forward really good. In the first place, these are, of course, petrochemicals, pharmaceuticals and agriculture. Therefore, if there are no pitfalls and limitations in this area, these segments may help to develop others," the economist explained.

"The multiplier effect may lead to the fact that we can get closer to the zero growth, that is, there will be no negative growth in the current year. The reduction of 0.7-0.8% is possible, instead of 1.2%. I think it is a more realistic outlook. And in the next year we may have a little higher growth, than they forecast  - 1%. I think, according to today's pace of development of the advanced industries, we can predict that they will pull the economy to 1.5% per annum," the expert believes.

"Such growth can be achieved due to the multiplier effect, due to the accelerated growth in agriculture, pharmaceuticals, petrochemicals after the import substitution program in these industries are launched. I have been in a store and saw all sorts of chemical products fully produced in Russia," Vasily Yakimkin concluded.

A professor at the department of the stock market and investments at the Higher School of Economics, Alexander Abramov, in turn, drew attention to the fact that the improvement in the economic outlook for Russia by the International Monetary Fund is linked to oil prices. "In the first half of this year, oil prices have demonstrated significant growth, so the IMF has taken this factor into account and has revised its outlook," he noted.

Speaking about how real Russia's economic growth by 1% in 2017 is, the expert noted that the forecast of the International Monetary Fund is almost identical to the forecasts of the Central Bank and the Ministry of Economic Development.

"This IMF rating is taking the possible further rise in oil prices into account. Also, the experts believe that in 2017, there will be a certain weakening of anti-Russian sanctions. Also, due to a process of reducing interest rates and the stabilization of inflation, the IMF suggests that the business and consumer lending will revive in Russia. Accordingly, if this happens, the business lending will increase investment activity and the consumer lending will increase customer demand. All of this will contribute to the growth. And finally, the outflow of foreign capital from Russia is slowing down now. Probably, it will be reduced to zero by 2017. This will also become one of the factors contributing to the growth," Alexander Abramov concluded.