MOSCOW, July 24 (RIA Novosti) - The International Monetary Fund (IMF) on Thursday lowered its outlook for Russia’s GDP growth this year from 1.3 percent to just 0.2 percent citing increased capital flight and sluggish investment activity threatened by geopolitical tensions.
“Our largest downward revision, relative to our WEO April forecast, is for Russia, where we have revised growth for 2014 from 1.3% to 0.2%, and for 2015 from 2.3% to 1%,” IMF Economic Counsellor Olivier Blanchard said, presenting the revisions in Mexico.
“This reflects mainly a deterioration of business confidence, which has been aggravated by geopolitical tensions. The result has led to large capital outflows, and a near freeze in investment decisions,” Blanchard stated in his opening remarks at the launch of IMF's World Economic Outlook (WEO) Update.
Earlier on Wednesday, the Russian president’s economic aide, Andrei Belousov voiced a much more upbeat expectation of a roughly 1-percent growth in Russia’s GDP for the current year.
In Early July, the Russian Finance Ministry said that Russia had sufficient reserves to compensate for most of the medium term losses associated with the geopolitical tensions undermining investor confidence. Moscow did, however, admit that sweeping Western sanctions against entire sectors of the Russian economy could slow the country’s GDP growth by 0.2-0.3 percent in 2014.
The WEO presents the IMF global-scale analysis and forecasts of key economic developments, released in April and September-October each year with separate updates announced and published if the economic circumstances so require.
Given the deteriorating Russia-West relations over the crisis in Ukraine, the United States and EU introduced phased sanctions against Russia. Earlier this week, head of German Chamber of Industry and Commerce Volker Treier warned that EU sanctions against Russia can lead to a “dangerous spiral,” echoing IMF’s Wednesday report on prospective global economic turbulence should the crisis persist.