Page 47 - RusRPTOct22

4.0 Real Economy 4.1 Industrial production
Russia’s contraction in industry slowed in August after industrial production posted a mere 0.1% contraction y/y in August, Rosstat reported on September 29.
The contraction in August was better than the still mild 0.5% y/y contraction in July. (chart) In month-on-month terms industry production grew by 1.2% in seasonally adjusted terms in August, Capital Economics reports.
Russia’s economy has been doing much better than expected in the face of the massive sanctions package imposed by the West following its invasion of Ukraine in February. Whereas most economists were predicting a GDP contraction this year of between 8% and 15% shortly after the war began, the estimates now predict a contraction of between 3% and 6%, depending on who you ask.
But the pain to the economy of sanctions is very unevenly spread and some sectors, automotive in particular, have been far worse affected than others.
“At the sector level the picture was one of more or less stagnation. Mining output growth rose from 0.9% y/y to 1.0% y/y and the downturn in manufacturing eased from -1.1% y/y to -0.8% y/y, Liam Peach, an emerging market economist with Capital Economics said in a note.
Mining and energy remain the sectors that are holding up the rest of the economy. Oil and gas output was more or less flat in August but remains more than 3% below its February level. Most of the strength in mining was due to a rise in metal ore mining, which had contracted each month since November.
“In manufacturing, there are clear signs that the downturn is no longer deepening in many sectors, such as metals and chemicals. But at the same time, very few sectors are recovering. Motor vehicles production barely rose at all m/m and remains 50% below end-2021 levels,” Peach said.
“Overall, the August activity data provide more evidence to suggest that Russia’s downturn has bottomed out and we think the deep 6% q/q contraction in GDP in Q2 will be followed by a shallower fall in Q3 (less than 1% q/q). We recently revised our forecast for the full year decline in GDP from 7% to 3%. But the economy is levelling off rather than recovering and we expect another contraction, of 2%, in 2023, particularly as tighter sanctions on Russia’s energy sector come into force,” said Peach.
47 RUSSIA Country Report October 2022 www.intellinews.com