Days after the International Monetary Fund (IMF) revised up its economic projections for Russia, its assessment is fiercely called into question by a group of economists in the United States. In an interview with Börsen-Zeitung, Yale University‘s Jeffrey Sonnenfeld accuses the IMF of „naïve, if not reckless, parroting of [Russian President Wladimir] Putin’s propaganda“. The IMF justifies his projections, stressing „that there is an unusually high level of uncertainty“.

Sonnenfeld, a professor at Yale School of Management, and his team of economists recently made headlines internationally by publishing a 118-page research paper on Russia‘s faltering economy („Business Retreats and Sanctions Are Crippling the Russian Economy“). Based on a range of „unconventional data sources“, they claim that Russia‘s economy is already in dire straits after five months of heavy sanctions and economics turmoil following Russia’s invasion of Ukraine. They intend to correct „widely held but factually incorrect misunderstandings over how the Russian economy is actually holding up amidst the exodus of over 1,000 global companies and international sanctions.“

On Tuesday, the IMF published the latest update of its World Economic Outlook. In their flagship report on the global economy, the IMF economists claim that the Russian Economy is holding up better than anticipated some four months ago: „Russia’s economy is estimated to have contracted during the second quarter by less than previously projected, with crude oil and non-energy exports holding up better than expected. In addition, domestic demand is also showing some resilience thanks to containment of the effect of the sanctions on the domestic financial sector and a lower than anticipated weakening of the labor market.“

Sonnenfeld accuses the IMF of „dangerous, if not even poisonous statements“ which, according to him, are unjustifiable under the auspices of the IMF, „given extremely sparse data availability“. Sonnenfeld elaborates that since the start of the Ukraine „the Kremlin’s economic releases are becoming increasingly cherry-picked – partial and incomplete, selectively tossing out unfavorable metrics“. He provides a number of examples for that claim and is wondering: „How could the IMF miss such massive data discrepancies?“ Sonnenfeld criticizes a lack of transparency and calls the methods and assumptions by the IMF a „black box“.

In an emailed statement, an IMF spokesperson said: „We want to stress that there is an unusually high level of uncertainty. Our latest baseline assessment of the Russian economy indicates that some sectors have been more resilient than initially projected, but this is not to say that Russia has been fully resilient to the sanctions. We are still projecting a very sizable economic contraction this year of 6%. Going into 2023, we expect that the impact of the sanctions that have accompanied the war will lead to a further deterioration of economic output. We have a revision of -1.2 percentage points for next year. More importantly, we expect that by 2027 the economy will be some 15% smaller than was projected before the war, and the gap will grow beyond 2027. That is a substantial and permanent economic loss.“

The IMF did not go further into specifics when confronted with Sonnenfeld‘s accusations. Here is what Sonnenfeld told „Börsen-Zeitung“ about what he perceives as „shameful“ economic forecasting by the IMF:

Concerning the IMF‘s assessment on the Russian economy as a whole:

Sonnenfeld: „The IMF actually accomplished something quite rare in that the more of what you read of their statements, the less you know. Yes, they subtract from knowledge on the vital matter of Russian faltering economic performance. Presuming them to be honest, the wizards at the IMF were, perhaps, too busy with their summer vacations to genuinely perform any analytical work and merely accepted Putin’s propaganda naively accepted the unexamined inconsistent misleading Russian statistics! [This is] the perfect example of naive, if not reckless, parroting of Putin’s propaganda“

Concerning the quality of official statistics released by Russian sources:

Sonnenfeld: „The Kremlin’s economic releases are becoming increasingly cherry-picked – partial and incomplete, selectively tossing out unfavorable metrics. The Russian government has progressively withheld an increasing number of key statistics that, prior to the war, were updated on a monthly basis, including all foreign trade data. Among these are statistics relating to exports and imports, particularly with Europe; oil and gas monthly output data; commodity export quantities; capital inflows and outflows; financial statements of major companies, which used to be released on a mandatory basis by companies themselves; central bank monetary base data; foreign direct investment data; lending and loan origination data; and other data related to the availability of credit. Even Rosaviatsiya, the federal air transport agency, abruptly ceased publishing data on airline and airport passenger volumes. How could the IMF miss such massive data discrepancies?“

Concerning the methods and assumptions for data analysis:

Sonnenfeld: „Since the Kremlin stopped releasing updated numbers, constraining the availability of economic data for researchers to draw upon, many excessively rosy economic forecasts have irrationally extrapolated economic releases from the early days of the invasion, when sanctions and the business retreat had not taken full effect. Even those favorable statistics that have been released are dubious, given the political pressure the Kremlin has exerted to corrupt statistical integrity. At least we put our methods into a public 120-page document and published it. Where are their methods [of the IMF]? If you go to their “methodology” on p. 7 of their [World Economic Outlook Update] report, they reveal that they have nothing to support their assumptions or even to reveal their assumptions!“