Why international institutions worsen economic forecasts for next year

by time news

The World Bank (WB) in its next report on Russia has lowered the forecast for the Russian economy by 0.4 percentage points compared to October expectations – to 2.4%. The change in the WB forecast for Russia is associated with a faster economic recovery this year, which reduces the growth potential next year, David Knight, the WB chief economist for Russia, explained to reporters. According to him, expectations for next year have worsened due to the new wave of COVID-19, low rates of vaccination in the country and possible restrictions on movement (an initiative to introduce QR codes in transport, cafes and shops). In addition, tightening monetary policy (MCP) due to accelerated inflation also has a restraining effect on the growth of the Russian economy.

This year, Russian economic indicators have exceeded the peak values ​​reached before the start of the pandemic, the WB report says. The forecast for 2021 remains unchanged – an increase of 4.3% is expected. In the second quarter of this year, household consumption grew by more than 9% compared to the previous quarter, which is a record in the last 10 years, economists point out. At the same time, “by the beginning of autumn, the onset of a new destructive wave of COVID-19 became obvious, which, combined with a low level of vaccination, poses a threat to both the economy and public health in Russia.” In the third quarter, economic growth slowed amid new measures to combat the coronavirus and a fading surge in consumer activity, the report said.

WB analysts also see risks to the prospects for the global economic recovery due to the new wave of COVID-19. According to their estimates, the number of cases of infection is growing worldwide, which could affect the level of economic activity in 2022. In addition, economists warn that the level of vaccination of the population against COVID-19 will be one of the main factors determining the outlook for countries for the coming year. …

On the same day, the Organization for Economic Cooperation and Development downgraded its forecast for world GDP growth this year by 0.1 percentage points to 5.6%. The organization estimates that the global economy will grow 4.5% next year, in line with its September forecast. At the same time, forecasts for the economy in the next year were revised for the worse in the eurozone (by 0.3 p.p. to 4.3%), the USA (by 2 p.p. to 3.7%) and China (by 0 , 7 pp to 5.1%).

A representative of the Ministry of Economic Development and Trade told Vedomosti that the ministry, if necessary, will update the macro forecast for the next year according to the schedule, taking into account all factors, its refinement is “tied” to the budget cycle. “We believe that 3% economic growth annually is an ambitious but achievable goal. It is based on three conditions. First, the implementation of all existing and recently created mechanisms for increasing investment (NWF funds, “infrastructure menu”, infrastructure budget loans, program 1704). Second, structural changes in the labor market to increase its flexibility and productivity. Thirdly, the development of exports, taking into account the implementation of the climate agenda, “- said the interlocutor in the Ministry of Economic Development.

The page is not flipped

On November 30, Assistant to the President of Russia Maxim Oreshkin during the Russia Calling! suggested that there are three options for the development of the world economy against the background of the emergence of a new omicron strain: negative (high severity of the disease and the ability of the new strain to bypass vaccines), the “false alarm” scenario (the strain will not be as serious as everyone thinks) and positive (severity the disease will be low and the omicron strain will displace the delta). It will take several weeks of research to make an accurate forecast, he said.

Economists interviewed by Vedomosti believe that the new wave of COVID-19 should not be dramatized – the world is ready for it much better than for the previous ones.

“There are vaccines, and the skill of modifying them, plus two drugs, one of which has shown very impressive test results. Therefore, the impact on the economy is likely to be less than that of the previous options, “- said the director of the analytical department of the investment company” Region “Valery Vaisberg. At the same time, according to him, there is still very little data on the omicron, so it is difficult to make forecasts. “Cautious optimism is encouraging that it was detected much faster than delta and beta,” emphasizes Weisberg. The experience of past pandemics says that subsequent waves are almost always softer than the earlier ones, agrees Anton Tabakh, chief economist at Expert RA. According to him, the collapse of the oil agreements will have a much greater negative effect than a new wave of the pandemic.

The deterioration of forecasts of international organizations reflects rather the realization that restrictive measures will be with us on a daily basis, notes Natalia Orlova, chief economist of Alfa-Bank. “The decline in forecasts is the result of an unpleasant surprise that the pandemic does not end, – after all, there was hope that we would turn this page. This translates into new parameters of the business and the labor market, and it becomes not temporary, but a permanent, built-in limitation that carries additional costs, ”she notes.

Vaccines for the economy

Vaccination in Russia is showing a slow, but still positive trend, emphasizes Weisberg. “I do not expect a significant negative impact on the economy,” the analyst added. In addition, he said, the unfolding compulsory vaccination campaign for certain groups of citizens is likely to gain momentum. The high rates of vaccination in Russia could improve the prognosis and they are likely to increase as a result of tightening requirements from the state, Tabakh said.

Orlova points out that the issue of vaccination is still an additional stress factor for the Russian labor market and the acceleration of this process will depend on it. “If in Europe, in a number of countries, decisions have already been made that labor activity implies vaccination, then we did not have such a direct connection. There was no such thing that people who decided not to get vaccinated were limited in their social opportunities for a long period, ”she notes.

“I don’t plan to change forecasts in connection with the new strain and codes, my current forecast [по росту ВВП России в 2022 г.] coincides with the assessment of the WB, ”notes Weisberg. The main constraint for the Russian economy next year, he said, is the tightening of monetary policy aimed at curbing consumer demand. The growth drivers will be the oil and gas sector and the recovering service sector, the analyst estimates.

Orlova notes that there is no reason to change the forecast for Russia’s economic growth next year (from 1.5 to 2%). The WB’s expectations, in its estimation, are quite optimistic.

Tabakh notes that Expert RA’s forecast did not change either, it remained at the level of 2.8%, while the factor of recovery growth, which had been preserved earlier, has now lost its significance. The main risks for economic growth in the new year will be measures to combat inflation and a tough monetary policy, the economist believes, and export industries and state investments should become drivers of growth.

“We expect the Russian economy to grow by 2.5% next year in conditions when cyclical sectors will rather slow down – this applies to retail trade, the financial sector and lending,” says Alexander Isakov, chief economist at VTB Capital. According to him, the greatest acceleration will be in oil production and associated sectors such as petrochemicals.


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