The EC cut its GDP growth forecasts for Russia for 2019 and 2020, according to the autumn forecast, published on Thursday. Growth is now seen at 1% this year, down from 1.5% in the spring forecast, which reflects primarily the VAT hike and weak external demand. The forecast for 2020 was slashed to 1.4% from 1.8% previously and it is among the most pessimistic. The EC expects that growth in 2020 will improve on the back of more accommodative macroeconomic policy and higher public spending, but it will remain constrained by soft global demand. The main downside risks to the forecast are oil prices, possible new US sanctions, a build-up of credit risk in the banking system due to strong growth of consumer credit, and delayed implementation of infrastructure projects.
We note that the EC growth forecast for 2020 is the most pessimistic one so far as most observers expect that higher public spending will push growth toward 1.7-2.0%. Earlier this week the EBRD said it expected growth of 1.7% in 2020, while the IMF predicted 1.9% in its October WEO. The World Bank also bet on a range of 1.7-1.8% in its October report, which is in line with the official 1.7% forecast assumed in 2020.