Page 50 - RusRPTSept22

Russian GDP in the third quarter: according to the regulator, the economy may fall by 7%, and inflation will continue to slow down.
But the Central Bank does not expect new serious sanctions, nor a global recession. All this together means that, other things being equal, the reduction of the key rate should continue, the bank said in a report on August 1.
In the third quarter the Russian economy should accelerate its fall to 7% from 4% in the second quarter and 4.9% in June, according to a forecast in the Central Bank's report on monetary policy. At the same time, inflation will slow by the end of September, the Central Bank expects 14.6% in annual terms compared to the current 15.3%.
The report is titled "A longer, but less painful economic recession" and this is fully consistent with governor Elvira Nabiullina's speech after the last rate cut by the Central Bank on July 22.
At the same time, the Central Bank presented an updated forecast for the year, reducing the expected fall in GDP from 8-10% to 4-6%, and the inflation estimate at the end of the year from 18-23% to 14-17%.
In the baseline scenario, the Central Bank assumes that the most negative forecasts will not come true. There will be no new serious sanctions against Russia. “Geopolitical tension in the world intensified in February. The baseline scenario does not imply a significant change in geopolitical conditions until the end of the forecast horizon”, the CBR said, as cited by The Bell.
The regulator also does not expect a global recession. “The base case assumes that a balanced monetary policy will allow the largest economies to avoid a major recession. But the risks of this scenario are skewed towards weaker growth and lower output levels in the coming quarters.”
Nevertheless, the Central Bank included both probabilities in the list of potential risks for the baseline forecast, indicating that both could lead to a weakening of the ruble.
The improvement in the Central Bank’s forecast reflects the objective picture in the Russian economy that has developed in the first half of the year and the beginning of the third quarter – while it is experiencing sanctions pressure and the country’s international isolation is better than expected.
“The drama of the economic downturn in 2022, in terms of the scale of the fall and the extended trajectory of recovery, so far looks more like the crisis of 2015 (with a fall in GDP by 2%) than the deep failure of 2009 (almost 8%),” said Renaissance Capital's chief economist at Russia and the CIS Sofia Donets.
50 RUSSIA Country Report September 2022 www.intellinews.com