The European Bank for Reconstruction and Development (EBRD) improved its forecast for the rate of recovery of the Russian economy in 2021 by 0.3 percentage points (p.p.). It is reported by Interfax with reference to the corresponding forecast of the organization on Tuesday, June 29.
Today’s EBRD estimate provides for Russia’s GDP growth this year by 3.3% against 3%, the October version of the forecast.
In 2022, the bank predicts a 3% growth in the Russian economy.
The new forecast will come true provided the country can avoid the third wave of the coronavirus pandemic. The EBRD stressed that this will “depend in part on accelerating the vaccination process.”
“The forecast is subject to a number of risks, not least geopolitical tensions, in particular the risk of further sanctions, as well as volatility in oil prices and demand,” the agency quoted the report as saying.
Economists believe that despite the twin shocks caused by declining oil prices and the COVID-19 pandemic, Russia’s economy has outlived 2020 “relatively well”, shrinking by “a relatively moderate 3%.” This reflects in part structural factors, including a large public sector and a relatively small service sector. It also reflects the country’s “strong macroeconomic position” at the start of the crisis, “with significant reserves created in response to several years of sanctions.”
The projections indicate that activity remained stable in the second quarter of 2021 and oil production should recover in response to the recent softening of production quotas.
However, the rebound in domestic demand has fueled fears of overheating, and interest rates are rising in response to inflation, which is well above the central bank’s target, the report said. The desire to preserve reserves to protect against the threat of further geopolitical risks means that the Russian authorities “are unlikely to postpone the withdrawal of fiscal stimulus.” At the same time, some support for demand will come from recently announced social transfers and cash transfers ahead of the parliamentary elections in September 2021, the EBRD said.
EBRD chief economist Beata Javorczyk also said on Tuesday that the spread of the delta strain of coronavirus is more threatening the economic growth of countries with low rates of vaccination against COVID-19. Gazeta.ru… She said that the mutation is dangerous for countries whose economies are heavily dependent on tourism.
Earlier in the day, Saxo Bank, a financial technology firm specializing in integrated online trading and investment, released its quarterly forecast for global markets for Q3 2021. Analysts predict that the third quarter for the Russian economy will be “better than average” amid rising prices for oil and other raw materials. By the end of the year, the dollar should fall in price to 68 rubles.
The head of the Ministry of Economic Development and Trade Maxim Reshetnikov said at the St. Petersburg International Economic Forum (SPIEF) on June 3 that the agency is going to raise its forecast for Russia’s GDP growth from 2.9% this year, provided that positive trends continue, but to give estimates on the dynamics of the economy in May so far complicated.
At the end of May, the head of the Bank of Russia Elvira Nabiullina, speaking in the State Duma, said that in the second half of this year, and perhaps by the middle of the year, Russian GDP will return to pre-pandemic levels.