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Faster than expected: Reshetnikov predicted that Russia’s GDP will grow 1.2% in 2023

Photo by Alexander Smagin on Unsplash

In 2023, Russia’s GDP will increase by 1.2% instead of the previously expected shrinking by 0.8%. Moreover, already in 2026, the growth of the index should accelerate to almost 3%. This was announced by the Minister of Economic Development Maxim Reshetnikov on Friday, April 14.

“The economy continues to recover … The GDP growth forecast is realistic,” Reshetnikov emphasized during his speech at an expanded collegium of the Ministry of Economic Development and the Ministry of Finance.

According to him, the rate of economic growth will increase mainly due to the revival of consumer demand. This, in turn, will be possible due to the increase in real incomes of the population.

As noted by Maxim Reshetnikov, the inflation rate in Russia should slow down from last year’s 11.9% to 5.3% by the end of 2023. Against this background, the wages of the citizens in real terms, that is, taking into account the increase in prices, may increase by more than 5% on average. Such dynamics, in particular, will be facilitated by low unemployment, competition for personnel and the work of government social programs, the minister said.

“This is a targeted assistance to families with children, indexing the minimum wage, cost of living, pensions, social benefits and allowances. Demand will be restored as the propensity to save is normalized in the population, and as consumer lending grows. In general, all of these factors will play into the increase in retail turnover and services,” added the head of the Ministry of Economic Development.

At the same time, according to the department’s assessment, the positive difference between exports and imports of the Russian will shrink this year. As a result, the Ministry’s experts expect the average dollar exchange rate to reach 76.5 rubles in 2023, and in the future they predict a gradual weakening of the national currency.

We recall that after the start of a special military operation in Ukraine, the EU countries, the U.S. and a number of other Western countries imposed more than 12.6 thousand different anti-Russian sanctions. In total, there are more than 15,300 sanctions against Russia – more than against Iran, Syria, North Korea, Belarus, Venezuela, Myanmar, and Cuba combined. This is evidenced by Castellum.AI, a global sanctions tracking database.

Restrictions, in particular, affected the banking sector, the energy sector, aviation and trade. At the same time, almost half of the country’s foreign exchange reserves (for $300 billion) were frozen, and many international companies announced their withdrawal from Russia.

Against this background, a number of analysts predicted a major collapse of the Russian economy in the spring of 2022. However, the real decline of GDP from January to December was only 2.1% and was even less dramatic than in the pandemic year of 2020 (2.7%) and the crisis year of 2009 (7.8%).

“We were able, under the leadership of our president, to withstand this difficult time when more than a dozen thousand sanctions were taken against our country with one goal in mind – to destroy its economy and practically deprive the population of the opportunity for normal income. And all this was, shall we say, not spontaneous, it was prepared over the years… We coped with the main challenges, according to many experts,” Prime Minister Mikhail Mishustin said during the board meeting of the Ministry of Economic Development and the Ministry of Finance.

Earlier President Vladimir Putin also spoke about the improvement of the situation in the Russian economy. According to him, the positive trends are now strengthening, and the country’s GDP may “significantly increase” in real terms as early as in April.

“There are reasons to believe that economic activity will continue to grow. This is indicated by such an important parameter as the business activity index. It reached 56.8 points in March, which is the third-highest reading ever and directly speaks of the growing optimism of domestic business and its positive mood,” Putin said at a meeting on economic issues on April 11.

As BitRiver financial analyst Vladislav Antonov told , by now the Russian economy has mostly already managed to adapt to the changed external conditions. For example, many sectors have refocused on the domestic market or started to work more actively with partners from friendly countries.

“The improvement in GDP expectations can partly be attributed to high energy prices. In general, our economy has its own resources. Moreover, we are talking not only about hydrocarbons, but also about domestic production, consumer demand and opportunities for product sales. The economic mechanism works and restarts itself,” Antonov added.

In the coming years, the development of import substitution and the creation of domestic products with higher added value and degree of processing should be the determining factors for Russia. This will allow the economy to return to pre-crisis values faster, said Georgy Ostapkovich, director of the Center for Conjunctural Research of the Institute of Statistical Studies and Economics of Knowledge, National Research University Higher School of Economics.

“I think a return to the base of late 2021 can be expected in the middle or at the end of 2024, if the current external conditions remain the same. The main thing is to prepare the economy not only for growth, but also for full development during this time, which implies an increase in employment and real incomes of citizens,” the interlocutor concluded .

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