World Bank "Russia's Growth Rate Revised Up to 4.3% This Year"

Adjusted Upward from 3.2% to 4.3%

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Cha Min-young] Russia is expected to record a growth rate in the 4% range this year, driven by faster-than-expected domestic demand activation and rising energy prices.

On the 6th (local time), the World Bank projected Russia's growth rate for this year at 4.3%, significantly higher than the May forecast of 3.2%, in its economic report on Europe and Central Asia. This is an increase of 1.1 percentage points from the previous estimate.

The World Bank cited faster-than-expected domestic demand activation and rising energy prices, which are Russia's major export items, as reasons for the upward revision of the growth rate. It also analyzed that the Russian government's fiscal support policies have had a certain positive impact on increasing the growth rate.

However, the World Bank downgraded Russia's growth forecasts for 2022 and 2023 from 3.2% and 2.3% to 2.8% and 1.8%, respectively.

It predicted that growth would gradually slow due to demand stabilization and a decline in prices of production goods such as energy. The U.S. sanctions on Russia introduced this year and a COVID-19 vaccination rate below 30% are expected to have negative effects.

Additionally, the central bank's interest rate hikes were cited as negative factors. The Bank of Russia raised its benchmark interest rate by 0.25 percentage points to 6.75% in mid-last month. This was the fifth consecutive increase since March, aimed at slowing the pace of consumer price inflation.

Source: World Bank

International credit rating agency Standard & Poor's (S&P) also raised Russia's growth forecast for this year from 3.7% in June to 4% at the end of last month. The 2022 forecast was revised upward from 2.5% to 2.6%, and growth rates of 2% are expected for 2023 and 2024, respectively.

The Russian Ministry of Economic Development also raised its growth forecast for this year from 3.8% in July to 4.2%. However, the 2022 forecast was lowered from 3.2% to 3%, while the 2023?2024 forecasts remained unchanged at 3%. The Bank of Russia expects growth of 4?4.5% this year and 2?3% for 2022?2024.

The World Bank stated, "The upward revision of the growth rate partially reflects the forecast for 2021 growth," and evaluated that "both domestic and external demand in the first half of 2021 will show a stronger-than-expected upward trend."

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