IMF: Cheap Oil Hurts Russian Economy More Than Sanctions

Тhe International Monetary Fund (IMF) says in its latest report on Russia that low oil prices have had a more serious impact on the country’s economy than sanctions, reports. 

Western sanctions imposed on Russia slowed the growth of the Russian economy by an average of 0.2 percentage points per year from 2014 to 2018, or one trillion rubles ($15 billion) in monetary terms. On the other hand, a global slump oil prices weakened the country’s GDP growth rate by an average of 0.65 percentage points ($48.75 billion) per year over the same period, the IMF’s annual country report says. 

The Russian government’s tight fiscal policy and restrictive monetary policy further weakened the GDP growth, accounting for 0.1 and 0.2 percentage points, respectively. 

Over the five years between 2014 and 2018 Russian GDP grew by just 2.5%, down from a theoretical 3.5% had sanctions not been introduced and 5.9% had all of those factors not existed. 

“In our opinion, the effect of sanctions is higher: I would estimate the average impact at 0.3-0.4 percentage points per year, that’s around 1.5 percentage points over the five year period,” the director of the Economic Expert Group Evsey Gurvich told RBC. 

According to Natalia Akindinova, director of the Higher School of Economics Center of Development Institute, sanctions originally had the biggest impact on Russia’s GDP growth, accounting for around 0.5 percentage points in lost growth, but the economy has since adapted and is starting to return to potential annual growth of around 1.5%.