IMF downgrades global and Russia’s growth, while Russia keeps muddling through in May

RUSSIA ECONOMICS - In Brief 25 Jun 2020 by Alexander Kudrin

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As IMF downgraded its 2020 global growth forecast to -4.9% (down from -3.0% previous forecast) Russia couldn’t remain unaffected. It now appears that the Russian GDP is set to shrink by 6.6% this year (down from -5.5%). IMF sees Russia doing better than the US (GDP down by 8.0%) and the EU (-10.2%). IMF still expects a very strong rebound of the global economy in 2021 - by 5.4%. However, the reasoning for such a bounce-back doesn’t look convincing and solid. GKEM Analytica expects a much more moderate recovery of the global economy next year, in line with one of the previous reports, in which the current situation in the developed countries in some sense looked comparable to Eastern Europe and the Soviet Union in early 1990es. Similar to those countries, the developed countries need to reduce some imbalances in domestic demand accumulated over a lengthy period of distortive near-zero interest policy and quantitative measures. Hence a kind of “economic transition” period is required.If so, then a fast V-shape recovery in 2021, seen on the chart below, cannot be taken for granted. Moreover, it doesn't look even a desirable one, because if such a bounce-back occurs (which is not impossible) it will mean not only the preservation of existing distortions but producing new ones. Meanwhile, the chart below illustrates that the IMF expects the global economy to deliver very strong growth in 2021, not seen since 2010. Note that the current recession caused by the “Great Lockdown,” as it is now called by IMF, is expected to be deeper than in 2009. On top of that, the current recession is expected to last longer as y-o-y economic growth already moderated in 2H08. In 2010 global e...