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The Russian economy under President Vladimir Putin, seen here meeting with auto workers in Saint Petersburg on Jan. 18, experienced something of a domestic rebound in the second half of 2022.
ILYA PITALEV/SPUTNIK/AFP via Getty Images
GLOBAL
Russia’s economy is now forecast to grow faster than Germany’s and Britain’s in 2023. How is that possible?
An IMF forecast puts numbers on a problem for the West when it comes to Russia and its war on Ukraine.
Nikhil Kumar
Deputy Global Editor
February 1, 2023
They look, on the face of it, like mistakes. This week, number crunchers at the International Monetary Fund
released forecasts saying that over the coming year, Russia’s economy will grow, while Britain’s will contract. And that Russia will actually grow faster than Germany, Europe’s economic powerhouse.
But there are no mistakes — just surprising turns of events, in all the countries involved.
The numbers would have been hard to imagine in the early days of the war, when Western sanctions sent the Russian stock market and the local currency, the ruble, into free fall, and hundreds of international firms — from McDonald’s to Boeing — pulled out of the country. In March 2022, U.S. Treasury Secretary Janet Yellen
confidently predicted that “the Russian economy will be devastated.”
Even the Russians expected a deeper economic crisis. The Russian finance ministry was
reported to be bracing for a fall in GDP of more than 10 percent. As recently as December,
a Reuters poll of 15 economists forecast a 2.5 percent drop for the coming year.
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And yet here we are, at the beginning of 2023, and the IMF
now predicts that the Russian economy, after contracting by 2.2 percent last year, will start growing again in 2023, expanding by 0.3 percent, and then 2.1 percent in 2024. As for those European powerhouses? The U.K. is expected to contract by 0.6 percent; Germany will still be in the black, but only just; growth this year is expected to come in at an anemic 0.1 percent.
“On the one hand, the Russian economy is definitely in a very complicated situation,” Sergey Aleksashenko, a former Russian central banker and deputy finance minister, said last month during a conversation
hosted by the Center for Strategic and International Studies. But as for the notion that there has been a total “collapse,” he added, “It’s not true.”
Which begs the question: How did this happen?