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EBRD raises GDP forecast growth to 4.3% in 2021

According to the report, inflation in Russia hit a 5-year high of 7.4% in September 2021

LONDON, November 4. /TASS/. The European Bank for Reconstruction and Development (EBRD) improved its forecast for Russia's GDP growth in 2021 from 3.3% to 4.3% while maintaining expectations for this indicator to grow by 3% in 2022, according to the report, published on Thursday.

"Overall GDP is expected to grow by 4.3% in 2021 and 3.0% in 2022, provided there is no significant deviation from the recovery path from the pandemic. Nevertheless, the forecast is subject to a number of risks both to the upside and the downside, not least geopolitical tensions, notably the risk of further sanctions, and volatility in oil and gas prices and demand," the report said.

According to the report, inflation in Russia hit a 5-year high of 7.4% in September 2021. "While to a large extent inflation has been driven by higher food prices and supply bottlenecks, to a degree the central bank sees the inflation shock as being driven by a rapid recovery in domestic demand - in no small part linked to the social payments - and rising inflation expectations," the statement said.

According to EBRD, "provided the social expenditure measures do not interrupt the underlying strong macroeconomic situation in the context of the ongoing sanction threat, they are likely to endure. The strong fiscal situation should provide support here. Oil revenues are robust due to high oil prices, and non-oil revenues should be boosted by tax hikes on businesses, among other things to force exporters to share high profits arising from commodity price increases".

In total, the EBRD's activities cover 39 countries. Russia has been a member of this organization since 1992. In 2014, after the European Union and the United States introduced sanctions against Russia, the bank suspended investment in Russian projects. According to the Russian Ministry of Finance, the size of the EBRD's portfolio in Russia could be reduced to zero in two or three years, if the organization's policy towards Moscow does not change.