Sanctions on Russia are ‘not sudden death’ but ‘a stranglehold’, says IMF

Sanctions against Russia related to the war in Ukraine, are not “not a sudden death” for Moscow but “a choke”, declares Pierre-Olivier Gourinchas, Chief Economist of the International Monetary Fund (IMF), Wednesday, May 10. The European Commission on Friday submitted to EU member states an eleventh package of restrictive measures against the country.

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According to him, “in Russia, the shock is cumulative”. Specifically, the country “has stopped converging with the rest of European countries in terms of standard of living”. “The shock will be permanent”, he predicted. According to IMF forecasts, “By 2027, Russia will have lost 7% of its income compared to what we would have expected before the war, if the sanctions continue”.

“There is a huge fiscal stimulus in Russia”

Despite these sanctions, “there will be a little bit of growth in 2023” in Russia “and a little more growth, perhaps, in 2024”, says Pierre-Olivier Gourinchas. “Why is the Russian economy doing rather not too badly? We must not forget the price of energy: Russia exports”, he explains, “less, but much more expensive”. For this reason, “revenues still remained quite high in 2022” but, predicts the chief economist of the IMF, “It will drop in the years to come, because there is a reorientation of energy flows”.

On the other hand, “there is a huge fiscal stimulus in Russia right now, which is going to fund military spending”. Russians “are not going to be able to maintain it necessarily, indefinitely”. “This kind of support for the activity which intervenes by the budgetary expenditure also has a limit in time”he points.