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Russia’s Economic Development Ministry upgrades its economic growth forecast from a fall to slight growth in 2023

Intellinews logo Intellinews 3/24/2023 IntelliNews
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Russia’s Economic Development Ministry has upgraded its economic growth forecast for 2023 from a fall of 0.8% to some small expansion of between 0.1% and 0.2%, Minister Maxim Reshetnikov said March 24. (chart)

'We confirm that our expectations for this year are positive, we expect significant growth based on the figures connected with the economic development, investment, better forecasts for people's income,' the minister said, as cited by Prime.

The Central Bank of Russia (CBR) also upgraded its outlook for 2023 last month from predicting a contraction to a more optimistic range of -1% to +1%.

Previously, the International Monetary Fund (IMF) also last month controversially increased its outlook for 2023 from a contraction to says Russia’s economy would grow by 0.3% in 2023 as it expects oil exports to continue largely unaffected by sanctions.

As reported by bne IntelliNews Russia’s economy has weathered the sanctions much better than expected, as it has successfully rerouted much of its trade from the West to the East.

At the same time the Ministry of Finance (MinFin) has been more optimistic about the outlook for the budget. Russia ended 2022 with a -2.3% deficit after 11 months of surpluses, but Russian Finance Minister Anton Siluanov forecast that this year’s deficit will be -2% that can be easily covered by the reserves in the National Welfare Fund (NWF) and circa RUB3.5 trillion ($45.8bn) bond issues on the domestic market – roughly the amount the deficit is expected to be in cash terms this year.

The outlook for the deficit is uncertain after Russia posted a huge RUB1.7 trillion deficit in January – more than half of the sum predicted for the whole year. However, Prime Minister Mikhail Mishustin said last week that budget revenues are expected to recover as the year wears on and ascribed the large deficit in January to the fact that a lot of social spending and other expenses were front-loaded this year to smooth the government’s obligations, as usually much of the social spending comes at the end of the year, which was to blame for the depth of the deficit last December.

Chris Weafer, the founder and CEO of Macro Advisory and former head of research at multiple Moscow-based investment banks, agrees and said the January result was a “one-off” and that budget revenues were already starting to recover in February and will continue in the months to come. In addition to the unusually heavy spending in January, the budget took a second hit from the introduction of the EU’sFebruary 5 embargo on the export of oil products, which saw oil and gas revenues collapse in January.

Russian oil companies are currently seeking new customers in Asia for the products that used to go to Europe and as it takes two months for the growing number of tankers in Russia’s “ghost fleet” , the situation with remaking the products market won’t be clear until about April, says Weafer. In the meantime, Russia cut its oil production by 500,000 barrels per day (bpd) in March and Deputy Prime Minister Alexander Novak announced this week that the cut will be extended until July, suggesting that Russia is struggling to find enough buyers to take up all the slack created by the February embargo.


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