Russian economy expected to grow despite Ukraine war fallout

FILE - A man stands next to an exchange office screen showing the currency exchange rates of U.S. Dollar to Russian Rubles in St. Petersburg, Russia, Friday, April 7, 2023.
FILE - A man stands next to an exchange office screen showing the currency exchange rates of U.S. Dollar to Russian Rubles in St. Petersburg, Russia, Friday, April 7, 2023. Copyright Dmitri Lovetsky/Copyright 2023 The AP. All rights reserved
By Euronews with AFP
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The country is defying expectations and weathering sanctions but an eventual slowdown is still expected.


Russia's economy will unexpectedly grow this year despite the war in Ukraine, according to a new forecast.

The European Bank for Reconstruction and Development (EBRD) estimates the Russian economy will see 1.5% growth. 

A previous forecast suggested it would contract by a similar figure, though the country is proving far more resilient than expected in the face of Western sanctions. 

Moscow's state coffers have been bolstered - again more than expected - by rising oil prices and Moscow's ability to offset the West's price cap by exporting to new markets, "mainly China and India", the EBRD said on Wednesday.

"At the time of our last forecasts, we expected sanctions - in particular the capping of oil prices - to be more effective in limiting Russian activity," it added in a statement. 

Following Moscow's invasion of Ukraine, the West slapped a raft of sanctions on Russia, unseen since the dark days of the Cold War. 

Assessment of their impact is mixed, with experts telling Euronews in August cracks, blindspots and loopholes in the sanctions regime limited their ability to Moscow where it hurts - in the pocket. 

Wednesday's EBRD report also found that activity "remained robust - in particular household consumption and public spending linked to the ongoing conflict."

"GDP figures [a measure of economic health reflecting the total value of goods and services produced by a country] for the second quarter were surprisingly high," it continued.

The figure compares perhaps surprisingly well to Europe's economic powerhouse Germany, which the International Monetary Fund recently forecasted will shrink this year. 

An eventual slowdown in Russia's economy by the EBRD is still predicted, however. 

Wider polling by the Open Minds Insitute showed on Monday this feeling is shared by the Russian population, with 80% worried about their financial well-being and seeing a gloomier future. 

For Ukraine, the EBRD has not changed its expectations, still projecting growth of 1% this year and 3% the next.

"This reflects very negative year-on-year growth compared to January and February last year", before the Russian invasion of Ukraine, notes the report. It nevertheless anticipates a rebound as more activity picks up, with improved energy supplies.

Across the countries throughout central, eastern and south-eastern Europe and Asia where it operates, the EBRD predicted overall economic growth of 2.4%. 

This is better than the 2.2% projected in May, thanks in part to Central Asian economies which are benefiting from the new situation created by the sanctions imposed on Russia, continued the institute. 

These countries should see their GDP grow by 5.7% this year, driven by the relocation of Russian companies to their territories and the increase in imports from the European Union, part of which is then re-exported to Russia, according to the EBRD.

The migration of workers from Central Asia to Russia, notably to compensate for the exodus of part of the working-age population, also supports the growth of these territories, as they send money back to their countries of origin.


The EBRD, founded in 1991 to help former Soviet bloc countries make the transition to a market economy, has since expanded its scope to include countries in the Middle East, Central Asia and North Africa.

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