Russia’s 2023 GDP Downturn May Be Softer Than Forecasts, With Room for Growth in 2024–2025
Recent projections from the ACRA credit rating agency suggest that Russia’s economy may shrink by 1 to 1.5 percent in 2023, a smaller drop than the earlier estimate of 2.8 percent. The shift comes as ACRA updates its macroeconomic forecast and lays out alternative scenarios for 2023 through 2025. In the base-case outlook, the 2023 contraction is limited to a modest decline, while 2024 is expected to see a modest rebound of roughly 0.8 to 1.8 percent, and 2025 could show growth between 0.4 and 1.6 percent, depending on a mix of domestic and international conditions. [ACRA]
Dmitry Kulikov, who leads the Sovereign and Regional Rating Group at ACRA, noted that the economy is expected to contract this year even as several key drivers show improvement. The group’s head, Elena Anisimova, emphasized that a combination of factors will shape the trajectory, including foreign trade dynamics and the allocation of budget resources. The assessment highlights that better export markets and targeted public spending could ease some pressures, but the overall path remains sensitive to external developments. [ACRA]
Analysts point to multiple forces weighing on the economy. A downturn is linked in part to lower production activity in the oil and gas sectors and tighter government expenditure plans. Yet there are countervailing signals as well. Investment appears to be edging higher, import substitution is contributing to some resilience, and consumption could strengthen as income support measures translate into greater household purchasing power. The forecasting team at ACRA also outlined two alternative paths for 2023 and beyond: a pessimistic scenario with a larger hit to growth and a more optimistic scenario with a quicker return to positive territory. In the downside case, contractions could reach about 2.4 to 3.2 percent, while the upside scenario suggests growth in the 0.6 to 1.4 percent range. [ACRA]
In mid-March, Maxim Reshetnikov, the Minister of Economic Development, spoke at a gathering of the Union of Industrialists and Entrepreneurs of Russia. He signaled that the government has revised its outlook for real household income and expressed confidence that the economy would fare better than before. Reshetnikov stressed that late-2022 data indicated the economy would begin to move more dynamically than earlier expectations, a view that aligns with ACRA’s more hopeful projections. The comments underscore the sense among policy makers that the upcoming year could bring a turn toward steadier growth, supported by investment and a gradual revival in consumer demand. [ACRA]
Looking at the broader context, analysts stress that the near-term picture depends on several interlinked factors. The performance of energy markets, domestic investment cycles, and government spending plans will all contribute to the ultimate pace of recovery. At the same time, the improvement in consumer confidence and a modest rebound in domestic demand could help offset some weaknesses in production. The combined effect of these forces will determine whether the economy settles into a gentle uptrend in 2024 and sustains momentum into 2025. [ACRA]