The World Bank has raised its outlook for the Russian economy. Despite existing sanctions and pandemic-linked risks, it expects the country’s gross domestic product (GDP) to grow by around 3%.
The bank expects that consumer and business confidence in Russia are set to improve, paving the way for a gradual economic rebound, if there is not a third wave of coronavirus infections in the country. If this is the case, Russia’s GDP is set to grow by to 2.9% and 3.2% in 2021 and 2022 respectively, the bank said, in its latest report. This is better than its December projections, which had put Russian economic growth at 2.6% for this year and 3.0% for 2022.
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The forecast revision came due to a lower-than-expected GDP contraction in 2020, when the virus’ spread led to countrywide lockdowns, and to the quick easing of restrictions, the report said.
However, the recovery of the Russian economy can still face several downside risks. The challenges could be linked to the possibility of new sanctions and a hesitancy to take vaccines, or to a possible lower-than-expected efficacy of vaccines. Another risk comes from the banking sector, which can be prone to deteriorating asset quality and profitability, partly due to an “overheated” domestic mortgage market.
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The World Bank estimates are lower than the projections of both the Russian government and the International Monetary Fund (IMF). According to the latest outlook by Russia’s Economic Development Ministry, the economy is set to expand by 3.3% in 2021 and 3.4% in 2022. The IMF is even more optimistic, projecting Russia’s GDP to add 3% and 3.9% over the same period.
Earlier this week, Saxo Bank said that the recent recovery of the energy market can boost the Russian economy in the next three months. According to its estimates, the growth of the country’s GDP in the second quarter will be driven by the commodity sector, with Brent oil expected to trade at $68 per barrel by the end of June and the gold price standing at $1,850 per troy ounce.
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