MOSCOW, November 15. /TASS/. The European Commission (EC) has substantially upgraded its outlook on Russia’s GDP dynamics for 2023 as it projects growth by 2% instead of contraction by 0.9% expected earlier, the EC said in its Autumn 2023 Economic Forecast, adding that Russia’s economy will grow by 1.6% in each of 2024 and 2025. In the document released this May, the EU projected Russia’s economic contraction by 0.9% in 2023, and 1.3% growth in 2024.

"Russia succeeded in diverting a large share of its exports, especially commodities, to willing buyers, notably China and India. However, voluntary oil production cuts and difficulties in replacing lost European markets for gas are expected to continue limiting the export recovery in the second half of the year. Overall, real GDP is forecast to grow by 2% in 2023," the report said. Russia’s GDP growth in each of 2024 and 2025 is expected at 1.6%, according to the report.

Inflationary pressures will persist in Russia in 2023 and abate later, the authors of the forecast said. Consumer inflation is projected to reach 6% in 2023. "Tight monetary policy and a slowing economy are expected to bring inflation down in the coming years, to 4.6% in 2024 and 4.0% in 2025," the report said.

"Inflation declined to a three-year low of 2.3% in April, mainly due to base effects, but started accelerating in the following months, fueled by high wage growth in a tight labor market and the strong recovery of domestic demand mainly driven by the fiscal expansion," the document said.

The EC’s experts project the federal budget deficit to exceed 2% of GDP in 2023, and to roughly stand at 2% of GDP in 2024. "In 2024, defense spending is expected to soar to about 6% of GDP, constituting about one-third of the total budget. Despite this, the budget is set to remain largely under control as the government has proven its ability to address revenue shortfalls through a range of windfall taxes, especially on energy companies," according to the document.