According to the IMF, the Russian economy is doing better than expected from the sanctions

The Russian economy is likely to suffer less than expected from international sanctions this year, the IMF said on Tuesday, adding that European countries, on the other hand, are suffering more than expected.

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Russia’s gross domestic product (GDP) is expected to contract by 6% in 2022, the International Monetary Fund expects, much less than the 8.5% contraction it had expected in its previous forecast in April.

“There remains a deep recession for Russia in 2022,” said IMF chief economist Pierre-Olivier Gourinchas during an interview with AFP.

“Russia’s economy should have contracted less than expected in the second quarter, exports of crude oil and non-energy products are holding up better than expected,” the institution said in its report.

“In addition, domestic demand is also showing some resilience thanks to the containment of the impact of sanctions on the domestic financial sector and a less-than-expected weakening of the labor market,” the fund adds.

Since the Russian invasion of Ukraine began on February 24, Western countries have launched a barrage of sanctions against Russia aimed at choking it financially and economically.

But “Russia’s central bank and Russian policymakers were able to avoid a banking panic or financial collapse when the sanctions were imposed,” said Pierre-Olivier Gourinchas.

And rising oil prices “offer huge revenues for the Russian economy, and that has helped prop up their economy.”

For 2023, the IMF expects a further recession in the Russian economy of 3.5%, 1.2 points less than in its previous forecasts.

“The cumulative effect of sanctions increases over time,” Gourinchas stressed.

On the other hand, “the impact of the war on the main European economies was more negative than expected”, specifies the IMF.

The economic growth forecasts for 2022 for Germany (-0.9 points to 1.2%), France (-0.6 points to 2.3%) and Spain (-0.8 points to 4%) have been lowered.

These greater impacts are due to “rising energy prices, as well as declining consumer confidence and a slowdown in manufacturing activity due to ongoing supply chain disruptions and rising raw material costs,” the IMF explains.

And a complete halt to Russian gas exports would “significantly” reduce eurozone growth in 2022 and 2023. This would effectively force European countries to introduce energy rationing, affecting large industries.

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