Page 11 - RusRPTSept22

weaker and additional sanctions are imposed on Russian exports. The financial operating environment is not expected to ease in any scenario.
The Central Bank of Russia published its strategy and outlook for the near term on August 12 entitled, "The main directions of monetary policy until 2025". In none of the CBR’s three strategies does the regulator see the economy recovering from the cost of the war in Ukraine or the sanctions imposed by the West.
The three scenarios are the baseline, accelerated adaptation and, most ominously, a global crisis.
Base case
The CBR’s preferred scenario takes into account the impact of all of the West’s sanctions, including the EU oil embargo which is due to start on December 5, when all Russian crude oil imports will be banned, followed by refined products on February 5.
Under this scenario the economy will contract by 4-6% this year and another 1-4% but return to growth in the fourth quarter of 2024 with a 1-2% expansion. Thereafter the economy will grow again, but will be limited to the range of 1.5-2.5% from 2025 onwards, according to Central Bank Deputy Chairman Alexei Zabotkin, as reported by The Bell.
During this period oil prices are expected to hold up at $80 per barrel in 2023 before falling to $70 and then $60 in the following two years respectively.
The CBR also expects the cost of the Urals blend of oil to return to the long-term equilibrium level of $55 per barrel in 2025, and indeed the discount between the Russian blend and the benchmark Brent blend has already narrowed from a peak of $35 to around $15-$20 now as Russia finds alternative clients to buy the oil that Europe is now shunning.
The main impact of sanctions has been to radically alter Russia’s trade dynamics and that will persist, the CBR said. Exports and imports will be reduced both in physical and value terms under the base case.
In terms of money, thanks to the extraordinary high energy prices, exports will grow to $593bn and support the federal budget, but then exports are expected to decline to $417bn in 2025 as the market cools. This is almost a quarter less than last year and only 9.4% more than in the pre-pandemic results in 2020. Nevertheless, export revenues remain healthy even in the slowdown mode.
The CBR predicts that the physical volume of exports in 2022 will decrease by 13-17% in 2023 and another 8.5-12.5% in 2024 before stabilising thereafter with a long-term growth rate of 2%, possible from 2025.
The accelerated adjustment scenario differs little from the baseline and is possible in the event of a modest increase in export revenues due to a “small” improvement in the situation with transportation and logistics, faster formation of new partnerships and economic ties, the CBR says. In this scenario, a slight economic growth is possible by the end of 2023, the Central Bank believes.
11 RUSSIA Country Report September 2022 www.intellinews.com