Economic outlook for 2023

Invest Foresight asked the leading economists about positive economic scenarios for 2023. Will there be any?

Natalia Seliverstova / RIA Novosti

Nikita Maslennikov, Director of Economics and Finance, Institute of Modern Development

– Speaking of economic outlook for 2023, we can certainly say that the year will be very hard due to the ongoing crisis and uncertainty, including in global economy. Nevertheless, if we manage to launch all task-solving mechanisms that have been discussed at various levels and promote the processes of structural transformation, we will be able to, given the growth in investment, hope for a positive quarterly growth. I think there is potential for that. We need to focus on the structural transformation of the economy because without it, we are limited by numerous restrictions that slow down our economic growth to 1.5%. This is the main challenge, and the main objective is to try and remove these restrictions.

Alexei Vedev, Head of Financial Studies Department, Yegor Gaidar Institute of Economic Policy

– As for economic prospects for 2023, there is potential, no doubt. Yes, there are also risks, but they are more or less known and understood. At the same time, the state and business must do everything in their power to minimize these risks. What are they? The external risk relates to the stagnation of many economies in the world which will most likely happen in addition to a high inflation rate which might affect Russia. The interior risk is the reduction of the profit-making capacity of business and citizens’ real disposable income. In such situation, the implementation of economic prospects is only possible if the state and business work together. Naturally, today and in the future, business will be very cautious, so the state should take charge of investment processes.

Igor Nikolayev, Economist, Chief Research Fellow, Economics Institute of the Russian Academy of Sciences

– There are prospects for improving the economic situation in 2023, they have always been there. The question is what prospects. I believe that the crisis in Russia caused by the strongest external restrictions is only unfolding. Given that the hardest sanctions for the economy related to the fuel and energy sector have only come into force, especially as regards oil embargo and price cap, it is hard to expect anything good. It seems that the economy, which has never got off the “oil needle,” will be hit the hardest. Now it is being said that the Russian economy has withstood the sanctions, but I believe that the year 2023 will put the economy to the test. The official forecast that predicts a GDP reduction by 0.8% is unrealistic, including because the first quarter will be disastrous. I think that in 2023, GDP will fall by 4% or even more. We are facing the developing and deepening crisis caused by very serious external restrictions.

Boris Kheifets, Professor, the Russian Government’s Financial University

– Naturally, the economic prospects for 2023 are related to the fact that 35% of the Russian budget is still being formed by oil and gas revenues, which are going to reduce due to the price cap and indirect sanctions such as mandatory insurance, and others. We expect the budget deficit at 2% of the GDP, with the ruble weakening and the average exchange rate expected at RUR 73.8 to $1 for 2023–2025, which is extremely favorable for export industries. The GDP may plunge or grow; this is still unclear. This is a general forecast under conditions of uncertainty; there may be plenty of possible scenarios, and much will depend on the course of the special military operation. There is another external circumstance – an emerging global economic recession. We will not be able to quickly adjust our economy to a new order, which may lead to a global surge in prices. And although we are largely isolated from the outside world, some of the issues will definitely affect us as well.

Agvan Mikaelyan, Board Member, FinExpertiza

– As to economic prospects, currently Russia has managed to maintain investments in infrastructure construction – at least at the budgetary level, which is a phenomenon. We are boosting construction efforts and shipbuilding, the vast majority being civilian ships. I believe we will have to simultaneously adapt to new conditions as we have not yet had time to do so. Plus, whether we want it or not, we will have to shift to a mobilization track, with state procurement becoming mandatory, which is provided by state resources. And finally, the key point is that this year Russia has to master about two dozen production technologies to various extents in its territory.

Alexander Abramov, Professor, Department of Stock and Investment Markets, Higher School of Economics

– Economic prospects for 2023 certainly exist, and I believe they are relatively favorable in general. Inflation may reach 5-7%, while the GDP will show a small growth of 1-2%. However, 2023 will be tougher than 2022 due to sanctions having long-term effects that will manifest as, say, technological problems or secondary sanctions. Such challenges will be harder to avoid. Budget issues will increase as well; in 2022, we managed to finance the budget through non-recurrent revenue to the Ministry of Finance, while this year’s recurring revenue is likely to decrease, and expenditures cannot be reduced.

Nikita Krichevsky, Doctor of Economics, Full Professor, Economist

– I see economic prospects for 2023 as gloomy. The lack of import substitution along with dismissive attitudes in the industrial, transport and infrastructure sectors will make 2023 significantly tougher as regards smooth functioning of the economy. Any equipment gets worn down and needs repair, which depends on imported spare components. China is no help to us in this regard, and neither is Iran. One third of those employed in our oil and gas industry are foreign workers – yet, no major positive changes occurred in 2022, with only idle talk and demagogy. My prediction is that there is a 75% probability of the ruble to significantly weaken in 2023. In case an additional round of mobilization is announced and the conscription term is extended, a new wave of entrepreneurs, technocrats and officials may flee the country. As architect of the German ‘economic miracle’ Ludwig Erhard said, 50% of economics is psychology. The very business climate we are talking about so much will slide into a stupor – what’s the point of taking loans, boosting your skills and competencies, and pursuing a career? The future of those who hold science degrees is utterly unclear as well.

Sergey Suverov, Investment Strategist, Aricapital Management Company

– We will most likely see the economic downturn to continue in 2023. Also, we will face challenges resulting from new sanctions to come into effect, such as on export of petroleum products starting in February. This may lead to the ruble weakening, have effects on inflation and economic activity, and lead to an income slump. Yet, the basic economy as well as the financial system will mostly remain more or less stable. Major banks and systemically important companies will avoid going bankrupt, but small and medium-sized businesses will possibly be seriously affected.

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