Page 8 - RusRPTSept22

However, trade with most other countries was also starting to recover by August.
The domestic car sector has virtually collapsed and went from producing circa 100,000 cars a month to a low of 3,400 in June, but has since recovered to circa 13,000 – still only around 10% of previous production levels. However, other sectors are faring better with metals and mining actually growing y/y and the agricultural sector remains relatively stable.
Russia’s manufacturing sector is highly import dependent and output was 7% lower in June than in December. Sectors that have experienced the largest falls are higher-tech sectors where foreign inputs are greatest, such as motor vehicles (-65%), pharmaceuticals (-25%) and electrical equipment (-15%). Less import-dependent sectors with limited foreign inputs have held up best, such as mineral products (+1%), food production (-1%) and coke refining (-2%). Import substitution is in motion in some areas, but is not enough to offset various headwinds and prevent a downturn in manufacturing from taking hold.
The last serious package of sanctions was the sixth package but by the seventh package of sanctions introduced on July 21 there is little left to sanction without causing extreme economic pain to the sanctions. Oil price caps were supposed to be introduced in the seventh package but failed to appear as this scheme seems to be unworkable.
Government tax revenues have generally held up well too despite the unfavourable appreciation of the ruble. The budget was still in a surplus in June, although a fall in gas and oil revenues meant month on month the budget was in deficit.
The Ministry of Finance expects that most of the social support spending will come in the fourth quarter and the EU oil sanctions will bite then too so that the budget is expected to end the year with a 2% of GDP deficit, but this can easily be covered by cash in Ministry of Finance’s account and the National Welfare Fund (NWF).
8 RUSSIA Country Report September 2022 www.intellinews.com