As the EU heads for a recession amid the deepening cost-of-living crisis, the sanctions-hit Russian economy, contrary to previous forecasts, is recovering, the Economist reported on Thursday.
“The economic war between Russia and the West is at a delicate moment. While Europe teeters on the brink of recession, Russia is emerging from one,” the publication said.
It further claimed that Western sanctions have severely hit Russia’s long-term prospects, while the partial mobilization has resulted in around 300,000 Russians fleeing the country. According to estimates cited by the Economist, Russians pulled out $14-billion worth of ruble deposits in September, about a third as much as in February.
“Despite these problems, the recession has probably now come to an end,” the report reads, pointing to a “current-activity indicator” by Goldman Sachs which follows how economies are doing month to month. “The data suggest Russian activity is livelier than in other big European countries,” the Economist says.
The article also states that rebounding output in the country’s car industry suggests that producers have obtained supplies from outside the West. In dollar terms, Russia’s monthly goods imports now almost certainly exceed last year’s average, the outlet reported.
The Economist cited the latest forecasts by the International Monetary Fund (IMF) as confirming the Russian economy’s recovery. The IMF has upgraded Russia’s prospects for 2022, saying it now expects a decline in the nation’s GDP of 3.4%, which is quite “manageable” according to the Economist, versus the fund’s April prediction of an 8.5% fall.
“Indeed, the data suggest Russia will be able to maintain its military spending,” the paper concluded.
The Russian Economy Ministry reported last month that, despite Western sanctions, the decline in Russia’s GDP is expected to be much lower than previously thought. In an improved outlook, the ministry now sees the economy contracting by 2.9% this year versus 4.2% projected in August.
The country’s economy is then expected to expand by 2.6% in 2024-2025, due to robust domestic consumer and investment demand.
Top government officials previously said the economy was holding up better than expected in the face of Western sanctions.
Meanwhile, economists have been sounding the alarm over the growing risks of a euro area recession, saying an economic downturn now looks almost inevitable. The latest survey by S&P Global showed that the drop in the Eurozone’s business activity deepened last month as the final composite Purchasing Managers' Index (PMI), seen as a good gauge of economic health, nosedived to a 20-month low.
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