IMF Revises Russia's 2023 Growth Forecast Upward by 0.8 Percentage Points to 1.5%

“The forecast for Russia in 2023 has been improved by 0.8 percentage point to 1.5 percent, reflecting hard data (on retail trade, construction, and industrial production) that imply that the first half of the year have been fruitful, with a large fiscal stimulus driving that strength,” the IMF said in its revised WEO.

Moreover, the WEO reported that major global economies face slowing growth in bank loans, and high interest rates may lead to tightening credit conditions.

“Immediate concerns about the banking sector have eased, but growth in bank loans in advanced economies has slowed, and high interest rates will likely lead to tighter credit conditions,” the international body highlighted.

The fund noted that in the US, despite the shift of deposits from regional to large banks, a tighter monetary environment continues to challenge financial institutions.

“In the euro area, mandatory repayments of loans from targeted longer-term refinancing operations are confronting banks that had relied on this source of funding, whereas in the United States, ongoing quantitative tightening and issuance of large amounts of Treasury bills after the recent debt ceiling episode could lead to further outflows from the banking system,” the statement read.

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At the same time, the IMF added that other financial conditions, including the credit quality of business borrowers and credit costs, are worsening.

The fund pointed out that major developing markets remain resilient and “largely avoided” the banking sector turmoil. However, many people there are still struggling to maintain access to international markets, according to the report.

Moreover, the organisation addressed China in the WEO, pointing out that investment in China has underperformed due to the real estate downturn, but that weakness was compensated by stronger net exports.

"Consumption growth has evolved broadly in line with April 2023 WEO projections, but investment has underperformed due to the ongoing real estate downturn in that country. Stronger-than-expected net exports have offset some of the investment weakness," according to the IMF.

However, net export contributions are declining because of the slowing of the global economy, the report said.

The fund noted that it left unchanged its forecast for China's GDP growth at 5.2% for 2023 and 4.5% for 2024.

Furthermore, the organisation explained that unresolved real estate problems with negative cross-border spillovers have applied additional pressure on China’s economy.

"Sovereign debt distress could spread to a wider group of economies," the WEO mentioned.

In addition, the IMF did not rule out that inflation could fall faster than expected, reducing the need for tight monetary policy.

As for the euro zone area, the fund forecasts that the economic growth will decrease to 0.9% this year from 3.5% in 2022.

“Growth in the euro area is projected to fall from 3.5% in 2022 to 0.9% in 2023” according to the WEO.

In terms of the global economic development, the IMF reported that it would fall from 3.5% in 2022 to 3% in 2023 and also next year.

“Global growth is projected to fall from an estimated 3.5% in 2022 to 3% in both 2023 and 2024,” the statement read.

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The fund pointed out that the forecast for 2023 is modestly higher than predicted in April, but it remains weak by historical standards.

“The rise in central bank policy rates to fight inflation continues to weigh on economic activity,” the international body clarified.

IMF Raises Russia's 2023 Growth Forecast to 1.5%