Page 18 - Russia OUTLOOK 2023

• GDP

The expectations of a large contraction for the Russian economy have
been constantly revised down over the year. In March analysts were
predicting a contraction of at least 15%, but by December the latest forecast is
for a mild 2.9% contraction, and some sectors like oil production are expected
to beat last year’s production levels.

The GDP contraction eased from a 6% q/q fall in the second quarter 2022 to
4.1% in the third to a 4% in the fourth quarter – a very small expansion in
quarter on quarter terms.

Russia’s government assumes that economic contraction in the country will not
exceed 1% in 2023, First Deputy Prime Minister Andrey Belousov told
reporters on December 16. The Russian Economic Development Ministry’s
official outlook for next year suggests a GDP contraction of 0.8%. This outlook
remains unchanged so far, Belousov said.

The robustness of the economy is being helped by very high energy prices as
Russia continues to export very large amounts of oil to the EU and new
customers in Asia. Imports have also bounced back as new routes to Russia
have been found and the parallel import mechanisms kick in.

“Even so, the economy is struggling for momentum and the outlook looks
bleak,” Capital Economics said in a note. At the same time, the price of Urals
has fallen from $80 to $55 as of December and this is likely to have a bigger
impact on Russia’s revenues than the oil price cap.

“Russia has already passed peak current account surplus.” says Capital
Economics, which predicts that energy export revenues will drop from $320bn
in 2022 to $200bn in 2023.

The Central Bank of Russia (CBR) forecasts collected by Consensus
Economics from 19 research institutes for this year's GDP change is −4.2%,
and for next year's −3%. The forecast for 2023 remains unchanged, i.e. the
economy is expected to contract by 1-4% next year and grow by 1.5-2.5% a
year in 2024 and 2025.

Domestic demand is forecasted to weaken less than previously predited this
year. Household consumption is expected to contract by 3–3.5%, while
investment could even rise in the range of 0-1%. Exports should contract by
15-16%, while imports decline by 22.5-23.5%.

That is on a par with other leading forecasters. The Bank of Finland Institute
for Emerging Economies (BOFIT) forecasted published in October expects
GDP to contract by 4% both this year and next year, but its projections will also
be revised down.

In terms of the damage to the Russian economy from the war and sanctions, in
September the EBRD forecast that the country’s GDP would fall 5% this year
and 3% in 2023, while wiiw has predicted a fall of just 3.5% this year and 3% in
2023.

18 Russia OUTLOOK 2022 www.intellinews.com