Page 53 - RusRPTAug22

pent-up demand is growing. “We will see this demand in the second half of the year in the form of a slowdown in the recession and a turnaround in retail sales,” Isakov said. Secondly, steady oil production is offsetting the decline in manufacturing, especially car manufacturing. And, thirdly, the distinctive model of Russia’s labor market — in which a significant portion of salaries are not fixed — means the market can adjust to a crisis by reducing wages and not firing staff.
What happens next? According to Bloomberg Economics, Russian GDP could stop falling by October. The lowering of interest rates and past experience of Russian recessions suggests the acute phase of contraction does not last more than six months, Isakov said.
But there is a threat to these sorts of predictions: a permanent decline in natural gas exports. In June, Russia supplied 633bn rubles of gas to international markets, compared with 1 trillion rubles in May, news outlet Vedomosti reported August 1 citing material from the Federal Tax Service presented at a Finance Ministry seminar. Official export figures have not been published since the spring.
More pessimistic observers point out that the full impact of export sanctions is yet to take effect. When they do, it could trigger a second wave of recession within the next year, according to Donets. “The ruble will fall to 75 against the US dollar by the end of the year and 80 to 85 in 2023. A second contraction of GDP will hit export-related industries,” she said. In addition, the government is likely to seek to reduce the deficit against a backdrop of reduced commodity income, hitting household incomes. However, inflation is likely to fall — Donets believes recessionary factors will prevail over inflationary ones.
53 RUSSIA Country Report October 2020 www.intellinews.com