IMF: "Very difficult times for the Russian economy"

The International Monetary Fund (IMF) warns that the Russian economy continues to face significant obstacles, even if the institution has changed its estimates for the growth of the country's economy in a positive way, informs CNBC.

At the end of January, the IMF doubled its forecasts regarding the pace of economic growth in Russia this year: +2.6%, compared to 1.1%, as predicted in October.

Despite this, IMF Managing Director Kristalina Georgieva sees more trouble ahead for Russia. The IMF official said yesterday, according to CNBC: "Russia's economy is one of war, in which the state - which, let's remember, had a considerable buffer, accumulated over many years of fiscal discipline - invests. Today, production in Russia is increasing for the military, and consumption is decreasing. This is how the Soviet Union looked: high level of production, low level of consumption".

Russian defense spending has grown massively since the start of the war in Ukraine in 2022. Last November, Russian President Vladimir Putin approved a state budget that increased military spending to around 30% of fiscal spending, up from nearly 70% % higher in 2024 than in 2023, according to CNBC.

Defense and security spending will account for about 40 percent of Russia's total budget spending this year, according to a Reuters analysis.

At the same time, over 800,000 people left Russia, according to estimates from last October. Many of those who have fled the country are highly skilled workers in fields such as IT and the sciences.

Kristalina Georgieva also says: "In fact, I think that the Russian economy is going through very difficult times because of the flow of people leaving the country and because of the reduced access to technology, which comes with the sanctions (not imposed by the West). So, although the numbers on the progress of the Russian economy look good, there is "a whole story" behind them, and it's not a very good story.

• Russian exports to Europe collapsed in 2023

Russian exports to Europe fell by more than two-thirds in 2023, after the EU drastically reduced its purchases of Russian oil and gas, according to official data published yesterday, according to AFP.

Russia's goods exports to Europe fell by 68% last year, up to 78.8 billion euros ($84.9 billion), the Russian Customs Administration reported, cited by the Interfax news agency. According to these data, Russian imports from Europe also decreased, by 12.3%, up to 78.5 billion dollars, notes Agerpres.

On the other hand, Russian exports to Asia, the region that replaced Europe as the main customer for Russian energy, increased by 5.6%, to 284 billion euros ($306.6 billion). This, while Russian imports from countries on the Asian continent increased by 29.2%, up to 174 billion euros ($187.5 billion).

In total, Russian exports fell by 28.3% in 2023 compared to 2022, the Russian Customs Administration said, highlighting Moscow's persistent difficulties in replacing former European trading partners with new Asian customers, but and from Africa and South America. The cost of the conflict in Ukraine therefore remains an important one for Moscow, despite the Kremlin's insistence that the Russian economy is resisting the sanctions imposed by the West and is reorienting itself towards other markets.

Overall, Russia's trade surplus reached 130 billion euros ($140 billion) in 2023, down 58.5 percent from 2022, when Moscow collected high revenues from energy exports after the invasion of Ukraine caused oil and gas prices to explode, and Europe continued to buy energy from Russia for much of that year.

After the West introduced sanctions against Russia, following the start of the offensive in Ukraine, the Russian Customs Administration stopped publishing numerous statistical data, including data related to the balance of trade with each country.

However, statistical data published in the middle of last month by the Chinese Customs Administration show that in 2023 trade between China and Russia reached a record level of 220 billion euros ($240 billion), and China has become Russia's main economic partner. .

Also, for the first time in history, the value of Chinese yuan deposited in Russian banks at the end of 2023 was higher than the value of US dollars, according to data from the Central Bank of Russia.