Moody's: Russia may make "unorthodox" economic decisions amid sanctions

By the end of 2023, Russia's GDP may decrease by 3 per cent as the probability of "unorthodox" economic decisions increases.

The expected decrease rate will follow a 2.1 per cent decline confirmed last year, RBC-Ukraine reports, citing the outlook of the international rating agency Moody's Investors Service.

“This forecast diverges significantly from the more optimistic estimates of the IMF, most Russian economists and the Bank of Russia. In its forecast, the agency referred to the fact that Russia may resort to 'unorthodox' fiscal policies as the impact of sanctions grows and the economy becomes more isolated. For example, monetary financing of the budget would entail negative consequences for inflation and macro-financial stability,” the report says.

Market experts reportedly agree that the government is being quite "orthodox" in its economic decisions, borrowing money and taking advantage of the low level of public debt. In addition, spending from the Sovereign Wealth Fund (SWF) has been quite conservative. Therefore, there are no preconditions for "unorthodox" decisions at the moment.

Analysts felt that the forecasts of foreign companies do not provide an in-depth analysis of the situation in the country. Given that they are made universally for many countries with a certain set of parameters, certain sets of data may still differ. For example, in the International Monetary Fund (IMF) forecasts, which also improved Russia's economic performance, global economic growth immediately raises forecasts in other countries as well.

Moody's predicted that the Russian budget will be dependent on the banking sector in the long term. However, borrowing from banks will increase the interest burden on the state. Subsequently, this burden will fall on federal loan bonds to cover the financing gap.