The World Bank has upgraded economic forecasts for Russia but warned that planned fiscal consolidation will hamper the country’s economic growth, the global body said on Wednesday, March 31.
The Russian economy suffered its sharpest contraction in 11 years amid the novel coronavirus pandemic in 2020 but its 3.1% slump was not as deep as the World Bank and other economists had predicted.
In a new report, the World Bank said it now expects Russia’s gross domestic product to grow by 2.9% in 2021 and 3.2% in 2022 versus 2.6% and 3%, respectively, that it forecast in December.
“Assuming that no third wave of coronavirus infections occurs in Russia, consumer and business confidence are expected to improve, paving the way for a gradual economic rebound,” the report said.
A Russian health official warned on Tuesday, March 30, that a third wave of coronavirus cases was emerging in the country, which started a mass vaccination campaign in December.
The World Bank report noted that Russia’s outlook faces “substantial downside risks,” including a possible deterioration of banks’ asset quality, hesitancy to take vaccines, or a possible lower-than-expected efficacy of vaccines.
“While near-term recovery will be contingent on the stemming of the pandemic, longer-term economic prospects will depend on boosting potential growth,” the World Bank said.
Its report said potential efforts to increase potential growth could include economic diversification, reducing the state’s economic footprint, leveling the playing field for the private sector, improving governance, and taking advantage of shifting global value chains.
In an interview with Reuters earlier in March, the World Bank recommended that Russia untangle a complex web of laws and foster a business culture that gives investors more security if it wants to attract foreign direct investment again. – Rappler.com