Sanctions imposed on Russia over Ukraine have brought growth to a standstill, had a "chilling effect" on investment and could force Moscow into economic isolation, the International Monetary Fund said on Tuesday, Censor.NET reports about it, citing Reuters.
With the Fund keeping its growth forecast at 0.2 percent this year, and the Russian central bank's at 0.4 percent, both undercut the Economy Ministry's hopes that its 0.5 percent estimate would be beaten this year and come in closer to 1 percent.
"Even without the escalation (of the Ukrainian crisis), prolonged uncertainty and the resulting deterioration of confidence could lead to lower consumption, weaker investment, and greater exchange rate pressure and capital outflows than assumed under the baseline," the IMF said in a report.
"Moreover, this risks derailing the reform agenda and a shift toward more emphasis on economic self-reliance rather than integration with the rest of the world."
The governor of Russia's central bank, Elvira Nabiullina, said economic growth was too low, causing concerns about investing in Russia. "The rouble's long-term stability is possible only by lowering the outflow of capital," Nabiullina told a central bank conference in St Petersburg.
Read also: Sanctions Have Led to Capital Outflow from Russia Worth More Than $100 Billion - Nemtsov
"This comes at a crucial moment when the old growth model based on energy and use of spare capacity has been exhausted and moving to a new growth model based on diversification requires new investment, including foreign technology," the IMF said.
Firms are not spending on tangible assets, such as building and infrastructure, and capital expenditure has been falling month after month, down 2.6 in April. Instead, money is flowing out of the country. The IMF estimates that capital outflows could reach $100 billion this year, in line with the Russian government's estimates.
The Fund said fiscal budget reserves, of around 0.3 percent of GDP last year, would cushion the overall budget balance from Crimea-related spending on infrastructure. The Russian government revised down its budget surplus forecast on Tuesday to 0.4 percent. "Under the baseline scenario, general government debt is expected to remain sustainable and low," the IMF said.
Russia's sovereign debt to GDP ratio stood at around 12 percent last year, while many developed countries, such as Italy or Japan, carry a burden of 100 percent or more.
The energy sector accounts for one-fifth of Russia's gross domestic product, two-thirds of exports and around one-third of general government revenues.