World Bank raises Russia’s GDP growth to 4.3% this year

The World Bank has raised its growth forecast for Russia’s economy to 4.3% in 2021, followed by moderate growth in the next two years, the organization said in its latest report for Europe and Central Asia.

“Output in Russia is projected to grow 4.3 percent in 2021, as the economy is supported by an earlier rebound in domestic demand and elevated energy prices. The forecast for 2021 growth has been revised up substantially,” the authors of the report said, citing a stronger-than-expected upturn in Russia’s domestic and external demand in the first half of 2021, as well as fiscal support from the government.

In its previous report, the organization estimated Russia’s GDP to grow by 3.2% in 2021. According to World Bank estimates, however, the country’s economy is expected to slow its growth in 2022-24.

“The recovery is then expected to moderate to a still solid 2.8 percent in 2022, as demand stabilizes and industrial commodity prices edge down. The outlook is also predicated on a gradual easing of OPEC+ oil production constraints and the eventual return to the fiscal rule. The escalation of geopolitical tensions, including additional US sanctions imposed in 2021, low vaccination rates, and increases in the policy rate from record lows are weighing on the growth outlook,” the report outlines.

The World Bank’s latest forecast for the remainder of this year is, however, more optimistic than that of Russia’s Economic Development Ministry, which recently projected the country’s economy to grow 4.2% in 2021.

The organization also predicted a slowdown in economic growth in the broader Europe and Central Asia region in 2022 after a speedy recovery this year.

“Economic activity in the emerging and developing countries of Europe and Central Asia (ECA) is expected to grow 5.5% in 2021, higher than initially projected due to a stronger-than-anticipated recovery in external demand in the first half of the year, as well as strengthening domestic demand due to vaccinations and support packages,” the report says. It notes that the growth rate is already diminishing due to stabilizing external demand and commodity prices, and when macroeconomic policy support is withdrawn, the World Bank predicts the pace of economic recovery for the region to stop at 3.4%. The organization warns, however, that containing the Covid-19 pandemic remains a challenge.

“The outlook remains highly uncertain given the continuation of the pandemic, unequal vaccine access, and vaccine hesitancy. The regional recovery has been accompanied by a rapid acceleration in inflation and remains vulnerable to financial stress, which could be triggered by an abrupt tightening of external financing conditions or a sharp rise in policy uncertainty and geopolitical tensions.”

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