Page 7 - RusRPTSept22

likely to last all winter as a result.
Despite the manoeuvrings due to the war Russia’s economy has still taken a big hit. Russian GDP contracted by 4% y/y in the second quarter of 2022, according to Rosstat, consistent with a fall of 6% in seasonally-adjusted q/q terms and in keeping with the growing consensus that the contraction of the economy his year is going to be much milder than previously anticipated at may 3-4% by year end – down from 15% predicted at the start of the war.
Russia’s Central Bank for the first time gave a forecast of a fall in 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.
War sets Russian economy back 4 years in a quarter. Twelve analysts offer a median forecast of a 4.7% drop in Russia’s GDP in the second quarter, Bloomberg reported on Aug. 11. The drop would bring the economy to its 2018 indicators. The level of the crisis caused by the sanctions is being likened to that of 2015, a relatively mild crisis, as opposed to the big ones of 1998 and 2008.
The short-term conclusions of the experts boiled down to the fact that the third quarter will be the peak of the decline in GDP (this also follows from the forecast of the Central Bank). But on a “longer trajectory of recession,” new tests await the economy, the most obvious is the entry into full force of EU sanctions at the end of the year, banning the import of Russian oil. This could trigger a second wave of GDP contraction.
Oil has been in focus and while the Yale report predicted that production would fall from the 11mbpd output pre-war to 6mbpd by the end of this year, by the summer oil production was recovering from a mild dip to 10mbpd in April. In July Russia’s oil output climbed back to near pre-war levels, averaging almost 10.8mn barrels per day -- the third consecutive month of oil production recovery.
That may change in December when the EU is due to ban the import of Russian oil completely and refined products from February. But many analysts speculate that a total ban will not be possible, although volumes may be reduced. The government is forecasting a possible reduction to 9mbpd by year end.
Trade in general remains reduced as sanctions and especially self sanctions by international companies producing products that are not on a sanctions list have all fallen heavily. The exception is Turkey where trade is up by half in the first half of this year on the level in the same period a year earlier.
7 RUSSIA Country Report September 2022 www.intellinews.com