World Bank increases Russia’s GDP forecast for 2021 but warns of impact of sanctions

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MOSCOW (Reuters) – Russia’s economic recovery will be stronger than expected this year, but US sanctions, a low vaccination rate and central bank monetary tightening will all weigh on growth prospects, the bank said on Wednesday global.

FILE PHOTO: A wellhead and drilling rig in the Yarakta oilfield owned by Irkutsk Oil Company (INK), Irkutsk region, Russia, March 11, 2019. REUTERS / Vasily Fedosenko

Russia’s economic rebound will overtake that of its neighbor Belarus, hit by Western sanctions amid a political crisis, but will be less pronounced than in other former Soviet republics like Armenia, Georgia and Uzbekistan .

After declining 3% in 2020, its sharpest contraction in 11 years, the Russian economy has returned to pre-pandemic levels, but is expected to lose momentum in the next few years without additional investment that could come from spending of State.

The World Bank said it now expects Russia’s gross domestic product to grow 4.3% in 2021 and 2.8% in 2022 from 3.2% and 3.2%, respectively. , which she expected in June.

This year, the economy “is supported by a previous rebound in domestic demand and high energy prices,” the World Bank said in a report on Europe and Central Asia.

In 2022, economic growth will slow as demand stabilizes and industrial commodity prices may decline, he said.

“Escalating geopolitical tensions, including additional US sanctions imposed in 2021, low vaccination rates and the increase in the policy rate from all-time lows are weighing on growth prospects.”

Russia has had to hike rates five times so far this year, struggling to contain stubbornly high consumer inflation and is on track to hike its policy rate by at least 25 basis points, from 6.75% on October 22.

CENTRAL ASIA, CIS

Russia’s forecast economic growth this year is lower than the 4.3% expansion the World Bank forecasts in Central Asia in 2021 and 2022, thanks to investment activity and despite the rate hikes induced by a higher inflation.

The region’s largest economy, Kazakhstan, is set to grow 3.5% this year and 3.7% next year.

“The medium to long term outlook in Central Asia could be hampered by stability issues in neighboring countries, including Afghanistan, amid heightened security risks and uncertainty over the influx of migrant refugees,” the World Bank said.

Among the other CIS states, Georgia was on track to post the strongest growth of 8.0% this year, followed by Moldova with 6.8% and Armenia with 6.1%.

The continuation of the COVID-19 pandemic amid low vaccination rates and high vaccine reluctance in some countries poses downside risks to the forecast, the global body said.

The World Bank has provided the following updated forecasts:

For a graph on the World Bank’s economic forecasts

Report by Andrey Ostroukh; Editing by Giles Elgood

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