Page 6 - RusRPTNov22

1.0 Executive summary
Economic activity stabilised in Russia in Q3 after the deep downturn in Q2. Car sales have bottomed out, manufacturing has bounced back and bank credit has started to flow again.
Analysts think GDP is likely to have stagnated or contracted slightly q/q in Q3. But there remain major weak spots. Car output is some 80% below its level at the start of the year, retail sales are barely growing, and metal mining is struggling.
The coming months are likely to remain challenging. The announcement by the government that it will mobilise reservists in September has caused a large fall in labour supply that will hit domestic demand. The inflation outlook has become less favourable too.
Although the headline inflation rate fell from 14.5% y/y in August to 13.7% y/y in September, m/m dynamics suggest that prices pressures have picked back up. This is likely to prompt the central bank to bring a halt to its easing cycle at one of its next few meetings.
What’s more, Russia has passed “peak current account surplus” and tighter sanctions on the energy sector will soon come into force. EU imports of crude oil and petroleum products from Russia have held up well in recent months but are likely to fall more sharply in Q1 2023 when the EU oil embargo takes effect. Taken together with the G7 oil price cap, analysts expect Russian oil production to fall by 1m bpd (or 10%) next year and for GDP to contract by 2.5% over 2023 as a whole.
But Russia’s trade is holding up surprising well given the extremity of the sanctions. The value of Russian exports to EU countries was about 20% lower in August than in the months before the war. In contrast, the value of exports to China was approximately 50% higher in August-September, and the value of exports to India was as much as 5-6 times higher than the pre-war level.
Russia's goods imports fell sharply in the spring after the Russian invasion, but have since recovered somewhat. In August, the value of imports was approximately 30% lower than in the months before the war, based on the statistics of trading partner countries.
Sanctions have crippled Russia’s economy, but as time passes it is finding new routes and customers. Imports from Turkey have soared to multiples of volumes in previous years and over all imports volumes by value have recovered 90% of their losses, but are running at about half of exports, leaving
6 RUSSIA Country Report November 2022 www.intellinews.com