Russia overcomes the "storm" of sanctions

The Russian economy will fully recover by 2024, Central Bank of Russia (CBR) Governor Elvira Nabiullina said.

WB forecasts Russian economy will grow despite Western sanctions. Photo: AP

Many sectors of the Russian economy are seeing steady growth. In particular, official statistics for April showed that business activity in many key sectors of the Russian economy - including manufacturing, construction, retail, services and public catering - increased.

The governor of the Central Bank of Russia noted that the business climate index is near a 10-year high.

However, with inflationary pressures on the rise, Ms. Nabiullina acknowledged the possibility that the CBR may have to raise the base rate at the next meetings to curb inflation. The rate of increase in the main interest rate will depend on the risk estimate to achieve the target of returning to 4% by 2024.

Meanwhile, on June 9, the CBR decided to keep its key interest rate unchanged for the sixth consecutive session, at 7.5% per annum. The CBR noted that domestic economic activity was growing faster than previously expected. The agency also forecast that the Russian economy would grow by up to 2% this year.

The World Bank has also forecast that Russia's real GDP will turn positive in 2024, despite the impact of Western sanctions.

Russia’s gross domestic product (GDP) growth is expected to turn positive in 2024, albeit at a modest 1.2%. “This change mainly reflects the unexpected resilience of oil production and higher-than-expected growth from 2022,” RT quoted the World Bank report.

According to WB experts, in an effort to cope with the Western embargo, Moscow has redirected oil exports to “friendly” countries, thereby maintaining fuel export volumes. “The price cap of $60/barrel imposed by the G7 and some Western countries on Russian oil has not had much impact on Moscow’s crude oil export sector,” the WB experts report said.

For its part, the Russian government remains positive about the economy. Russian Prime Minister Mikhail Mishustin predicts that by 2024, the Russian economy could surpass developed countries in terms of growth rate. Recently, the Russian Ministry of Economic Development forecast that the country's GDP will increase in 2023.

In his latest statement issued on June 7, President Vladimir Putin affirmed that self-sufficiency is the key to Russian economic growth in the context of having to withstand Western sanctions and the risk of global economic recession.

According to the Kremlin leader, Russia will prioritize the development of the technology and financial sectors, optimize logistics routes, improve infrastructure and tackle inequality and poverty.

President Putin said the global economy will continue to slow down in 2023, while Russia's GDP could grow by up to 2%.

To date, the European Union (EU) has adopted 10 rounds of sanctions against Russia over its military operation in Ukraine. The sanctions have targeted various sectors of the economy, as well as many Russian individuals and organizations.

Nearly 1,500 people and more than 200 entities in Russia have been hit with travel bans and asset freezes, according to the FT. The sanctions have banned bilateral trade flows worth more than $148 billion, including energy imports from Russia, as well as exports of technology, machinery and electronics.

In addition, the Group of Seven (G7), the EU and Australia have imposed a price ceiling of $60 a barrel on Russian crude oil, effective December 5, 2022. The aim is to limit Moscow's financial resources for the war in Ukraine. Western insurance and shipping companies are prohibited from providing services for Russian oil and oil products unless they are purchased at or below the ceiling price.

Compiled by NGUYEN TAN

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