Page 6 - RusRPTAug22

1.0 Executive summary
Russia Inc is doing better than expected despite sanctions. International Monetary Fund Chief Economist Pierre-Olivier Gourinchas told AFP in an interview that higher energy prices are keeping Russia afloat despite Western sanctions. The IMF has upgraded Russia's GDP estimate by 2.5 percentage points, but says that its economy is expected to shrink by 6% this year.
That is still a much better result than the 15% contraction that was predicted at the start of the war and the 8% contraction most economists were predicting only a month ago. The Central Bank of Russia (CBR) is even more optimistic, saying it now expects the economy to contract by only 5% this year.
Nevertheless the sanctions shock has delivered a lot of pain.
Russia’s GDP contracted 4.9% y/y in June with the main support coming from a 2.3% growth in mining sector. But other sectors have fared far worst, depending on how dependent they are on imports – and it turns out nearly every sector in the Russian economy depends on imports to come extent.
Car-making has been worst hit, with production down in May to around 3,000 cars for the entire sector, six factories in total. Production recovered somewhat in June to 13,700 cars, but normally between 100,000 and 150,000 cars roll off production lines each month.
On the trade front Russia is doing much better. The production of oil and gas are both down but thanks to the high prices they are both earning record levels of money. China and India have stepped in and taken up most of the oil and that was exported to Europe, allowing production to grow again in June. The leakage to the sanction’s regime, as bne IntelliNews predicted at the start of the war, is significant. That is not to say that India and China are actively working to support Russia. More that both countries are taking advantage of the situation to make money.
The upshot is Russia is running an all-time high current account surplus that is on course to end the year around the $300bn mark - roughly equivalent to the amount of CBR reserves frozen by EU at the start of the war.
Russia reported a current account surplus of $136bn for the
6 RUSSIA Country Report October 2020 www.intellinews.com