World Bank forecasting 2020 Russian GDP decline of 9.6% under adverse scenario compared to 6% drop in baseline scenario
MOSCOW. July 6 (Interfax) - The depth of the recession in the Russian economy in 2020 in an adverse scenario could approach 10%, World Bank experts said in their traditional Russian Economic Report.
The baseline scenario of the World Bank envisages a 6% GDP decline with moderate recovery in 2021-2022. This corresponds to the lower bounds of the Central Bank of Russia (CBR) forecast (-4%-6%) and is a more pessimistic outlook than the Economic Development Ministry's forecast of -4.8%.
However, the World Bank has also prepared another version of the forecast, the report reads.
" In a more adverse scenario, GDP could contract by 9.6 percent in 2020 and recover by a marginal 0.1 percent in 2021," the report said. The World Bank submits, however, that "any numerical forecast for the period ahead, however, is subject to unprecedented levels of uncertainty and assumptions."
In the baseline version, the compensating GDP growth will total 2.7% in 2021 and 3.1% in 2022.
Total household consumption in 2020 in the baseline scenario will decrease by 4.9%, while gross fixed capital investment will decrease by 8%. As uncertainty diminishes, household consumption is expected to recover and investment is expected to increase by about 3% in 2021.
The budget deficit of the expanded government, according to Bank estimates, will in 2020-2022 comprise 7.2%, 1.6%, and 0.5% of GDP, respectively, and will be financed by the NWF, proceeds from the purchase of Sberbank , unspent 2019 funds and higher borrowings (both at the federal and regional levels). According to the forecasts, by the end of 2022 the NWF will be about 8% of GDP.
Inflation in Russia is expected at 3.7% in 2020 and 4% in 2021-2022. With much lower energy exports, the current account balance is expected to turn negative in 2020-2021. Net capital outflow is expected to stay moderate on the back of lower profits, a weaker ruble and a higher confidence of investors based on macro stabilization policies since 2015.