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‘No recovery in sight’ in Russian economy: IMF chief economist

The global economy is grappling with multiple shocks including fallout from Russia’s invasion of Ukraine, which sparked sanctions, and “there is no recovery in sight” for Moscow, IMF economic counsellor Pierre-Olivier Gourinchas said Tuesday.

In the International Monetary Fund’s latest World Economic Outlook report, it cut its forecast for global growth and warned that major economies will continue to stall.

Below is an excerpt from an AFP interview with Gourinchas:

We are projecting a recession in 2022... And we’re also anticipating it will decline further in 2023. In fact, if you look beyond 2023, we anticipate that output will keep going down or staying very low.

So there is no recovery in sight in the Russian economy... The high energy prices and the continued energy exports by Russia through the first half of 2022 have certainly propped up the Russian economy... But the shock is still large and very, very persistent.

Energy plays a very important role in the revision to the forecast and the projections for German and Italian output, because they’re very dependent on gas, gas has become extremely expensive... Fiscal policy has a role to play in being supportive, and helping vulnerable households or critical parts of the industry.

The worry there... is that it has to be done in a way that addresses the underlying energy crisis... An energy policy that countries may want to put in place to protect households... needs to also make sure that it doesn’t exacerbate the energy crisis, that it doesn’t stimulate demand.

The battle against inflation has not been won by far... If central banks move away from the path they’ve announced... Then you could see inflation pressures remaining more persistent, more inflation.

And the risk you run is at some point, people, households, businesses start looking at this and say, well, you know, this promise of having 2 percent inflation is a joke. We’re not going to get that. And at that point, you have a much harder fight ahead of you to bring down inflation. — AFP