Page 8 - RusRPTOct22

According to Rosstat's detailed estimate, Russia's GDP fell by 4.1% year-on-year in the second quarter of the year. In the first quarter, annual growth was still 3.5%. The Russian economy expanded slightly in July–August, analysts of the central bank’s research and forecasting department said in a report late on September 7.
Russian President Vladimir Putin gave the most optimistic forecast for this year’s economic performance of any government yet, saying that there will be no budget deficit and that economic contraction will be no more than 2.5% on September 7.
Much has been written in September about the evaporating budget surplus, but this comes as no surprise and was in the plan since April. Oil and gas revenues have fallen dramatically, and oil revenues are expected to halve by the end of the year.
Nevertheless, Russia’s booming current account surpluses are expected to continue both this year and next. The latest Consensus Economics survey of major forecasts finds an average current account surplus of $196bn this year and $124bn next year. The Central Bank of Russia expects the current account surplus to hit $243bn this year and $125bn next year. The CBR preliminarily puts the current account surplus for the first seven months of this year at $167bn dollars. All of those numbers are records compared to the pre-war period.
Russia is on course to have a 2% of GDP budget deficit but that can easily be covered by the money in Ministry of Finance (MinFin) treasury account, money in the National Welfare Fund (NWF) and borrowing from the banks on the domestic ruble bond market. In addition the Central Bank of Russia (CBR) can print money to fund any short fall going forward as the tight capital controls will allow it to shelter the economy from run away inflation for some time to come.
The West is responding to the looming annexation of the Donbas and other regions with an eight round of sanctions that will take a step closer to imposing an oil price cap scheme, but implementing it full.
However, the sanctions possibilities have run their course as they are now inflicting as much, or more, damage on the western economies as they do Russia. The failure to launch a functioning oil price cap mechanism is on example. The exclusion of diamond trading from the eight package is another as it is too important to Antwerp and the Belgian economy. And the eight round also included the easing of some sanctions on commodities like coal, cement and fertilisers that the EU cannot still source elsewhere.
On the flip side Putin continues to wage an effective economic war agains the West. Restricting gas supplies have effectively caused an energy crisis in the West and that has forced governments to spend around halt a trillion euros on
8 RUSSIA Country Report October 2022 www.intellinews.com