Russian economy to grow this year: European development bank

The European Bank for Reconstruction and Development on Wednesday said it expected Russia’s economy to grow in 2023 thanks to rising oil prices, having forecast a contraction earlier this year.

The EBRD expects growth of 1.5% after predicting contraction of 1.5% in an estimate made in May.

“The outlook for 2024 will depend heavily on how the war on Ukraine and the related economic sanctions evolve; at this stage growth of 1.0% is projected,” the bank said.

Contacted by AFP, the bank explained that in May it expected Western sanctions against Russia, in particular a price cap on its oil exports, “to be more effective in constraining” the country’s growth.

“But oil revenues have been supported by rising oil prices and Russia’s ability to offset the impact of the cap by exporting to new markets,” it said.

The EBRD named such markets as China and India, adding that Russia’s economic “activity has remained robust — particularly household consumption and government spending on the ongoing conflict”.

Russia’s central bank has forecast the country’s economy to grow between 1.5 and 2.5% this year and between 0.5 and 1.5% in 2024 as Moscow grapples with labour shortages, sanctions and lower export revenues.

The EBRD added that it expected the Ukraine economy to grow 1.0% this year “on more businesses resuming operations and improved energy supply”.

It predicted output of 3.0% in 2024, “on the assumption that the war continues at the current intensity”. Both forecasts were unchanged from May.

The EBRD was founded in 1991 to help former Soviet bloc nations embrace free-market economies, but has since extended its reach to the Middle East and North Africa.

The bank said growth in its regions would expand by an average 2.4% this year before picking up speed to register output of 3.2% in 2024 as inflation eases further.

“Our economists see a diverging pattern of growth among the EBRD regions,” said EBRD chief economist Beata Javorcik.

“The robust growth of the economies of Central Asia and the weaker performance of those in central Europe and the Baltic states reflect the different consequences of energy prices, inflation and shifting patterns of trade.”

The Bank said the forecasts did not take into account the recent earthquake in Morocco.