Page 52 - RusRPTAug22

3.2 Macroeconomic outlook
President Vladimir Putin aide Maxim Oreshkin predicted a 5% fall in GDP and 15% inflation back in May. That sparked arguments and looked like excessive optimism (the Central Bank at the end of April forecast a GDP fall of up to 10% with inflation at between 18% and 23%, and the Economic Development Ministry predicted 7.8% and 17.5% respectively).
Now, though, Oreshkin’s predictions seem spot on. In a new forecast released last week, the Central Bank anticipated GDP to fall between 4% and 6% with inflation at 12% to 15%. The International Monetary Fund last week upgraded its recession forecast from 8.5% to 6%. At the start of June, investment bank JPMorgan revised its GDP forecast to a 3.5% fall.
The economic data is backed up by a survey of business sentiment carried out by the Central Bank in late June. The business climate indicator (BCI), which reflects the expectations of companies, was up for the second month running and had returned to a positive level for the first time since February. Having said that, long-term expectations were dire. That suggests businesses are anticipating long-term uncertainty and fear there could be another significant economic deterioration, according to Renaissance Capital’s Donets.
For the moment, the economic downturn of 2022 looks more like that of 2015 (when GDP fell 2%) rather than the crisis of 2009 (when the contraction was almost 8%), said Donets.
Why hasn’t the economy suffered more? Viktor Tunev, chief analyst at Ingosstrakh Investments, said the slower than expected economic decline was down to a number of different reasons. Firstly, export restrictions (especially on oil) have proved ineffective and export revenues have increased along with prices. Secondly, after an initial shock, policymakers quickly shifted to economic stimulus: pensions went up almost 20% for the year and other government spending has increased to replace the decline in lending activity amid high interest rates. Now that interest rates are lower than at the start of the year (8% versus 8.5%) and new loans are appearing, the lending dynamics look set to return to normal.
Isakov from Bloomberg Economics identified three factors contributing to the current economic stability (he predicts a 3.5% GDP fall this year). Firstly, savings are growing (the fall in real disposable incomes is much less than the decline in retail sales and service demand). Similar to the peak of the pandemic in 2020,
52 RUSSIA Country Report October 2020 www.intellinews.com