Page 30 - RusRPTSept22

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.
Global crisis The CBR also sketched out a scenario where the current shocks and imbalances cause a global crisis on the scale of the Great Financial Crisis of 2008.
CBR Governor Elvia Nabiullina should not be taken lightly in these predictions, as she very early on and correctly called the global inflation wave everyone has been suffering from in the last year and started tightening very early in May 2021. As a result, Russia has come to an end of its tightening cycle and Russia is the only country in Europe where inflation is now falling. (chart) However, the global economy has been battered by multiple crises in recent years. The global pandemic has seriously disrupted supply chains and to an extent caused a reversal of globalisation. That has had a knock-on effect of ending a decade of unusually low inflation rates. Rising prices have only been exacerbated by the war in Ukraine, which has poured petrol on the first of inflation and destabilised commodity markets that are bound to remain volatile as the economic war between the West and Russia looks like it could last years.
Russian President Vladimir Putin’s decision to invade Ukraine has unleashed very large tectonic forces that will, among other things, lead to the extensive restructuring of the global energy markets. In this uncertainty the CBR speculates conditions are ripe for a “Global Crisis” scenario.
The fragmentation of the global economy will continue and trade between countries will increasingly be concentrated in regional blocs, the Central Bank writes. Indeed, these trends were well underway before the war started and are bound to accelerate now as the West seeks ways to tighten the sanctions noose around Russia’s economic neck.
30 RUSSIA Country Report September 2022 www.intellinews.com