The International Monetary Fund has substantially lowered its growth forecast for Russia this year as EU and US sanctions will take their toll. Technically speaking, the country is already in recession, the lender says.
The International Monetary Fund (IMF) was expecting the Russian gross domestic product to expand by just 0.2 percent in 2014, compared with an earlier forecast of 1.3 percent growth, the global lender of last resort said Wednesday.
The IMF attributes its downward revision to international sanctions imposed on Russia over the crisis in Ukraine which are hurting the economy and threatening investment.
Moreover, the IMF was expecting capital outflows of a total of $100 billion (72.4 billion euros) in the wake of existing sanctions and the risk of further punitive measures to be imposed on Moscow, notably by the EU and the United States.
“The difficult situation and especially the uncertainty surrounding the geo-political situation are weighing very negatively on the investment climate,” the IMF's mission chief to Moscow, Antonio Spilimbergo, told reporters.
In the first quarter of 2014, the Russian economy contracted compared with the same three-month period a year ago. Spilimbergo's comments suggested that he expected a further contraction in the second quarter, which would see Russia in a technical recession.
“If you understand by recession two quarters of negative economic growth, then Russia is experiencing recession now,” he said.
The IMF told Russia macroeconomic stability was needed to offset the economic impact of the Ukraine crisis. Spilimbergo said this must include flexible exchange rates and tighter fiscal policy. He added that Moscow's course of limiting government spending was the right decision.
uhe (Reuters, AFP)