Page 7 - RusRPTNov22

Russia with a healthy balance of payments surplus. The current account contracted in the third quarter, but remains at record levels compared to pre-war at $153bn in the third quarter.
There has been a growing realisation in Europe that the Ukraine war induced crisis is going to get a lot worse before it gets better. Russia’s ability to muck about with commodity price and supplies is having a devastating short-term effect on Europe economy, but Russian President Vladimir Putin’s fiscal fortress is proving to be a lot more robust than had been expected.
The Central Bank of Russia (CBR) monthly macroeconomic forecast for October brough more positive news with a consensus contraction forecast of only 3.5%, way better than the 15% guesses at the start of this year.
Rosstat reported that a wide range of industries continued to show reversal in their downward trend or at least, some pause in their declining pattern in August. In fact, manufacturing increased c0.7% m/m in August, with construction surprising with a further 1% m/m s/a growth, while transportation also indicated a moderate recovery at 0.1% m/m s/a.
All these trends pointed to a moderation in economic contraction – according to the Economy Ministry, the Russian business activity showed 4.1% y/y contraction in August v 4.3% in the previous month.
Russia’s economy has been irreparably damaged by the sanctions regime, but that pain will only kick in in a few year’s time. In the meantime the expanding polycrisis is hurting the rest of Europe’s economies which are falling into deep recession as well as costing north of half a trillion euros in relief and aid so far – a number that will certainly double or more in the next year.
Life has remained fairly normal in Russia until now, but things changed with Putin’s decision to mobilise in September. There is a creeping realisation that the forecast rebound in consumption activity this autumn will not appear. That will take a large chunk out of expected federal tax revenues next year and 40% of Russia's GDP is now located in regions operating under creeping martial law, mostly concentrated in the populous European part of Russia.
The Audit Chamber says budget revenues as a share of GDP are expected to fall from 19% for 2022 to 16.3% in 2025 at a time when spending has increased so much that the break-even barrel of oil price has increased from around $42 to an estimated $96 now – slightly more than the current market price, and that is not taking into account the fact that Russia is offering a circa $20 discount on the oil it sells to its partners as the cost of sanctions on the oil business. But with so little debt and the financial system under lockdown, the CBR can print its way out trouble for the foreseeable
7 RUSSIA Country Report November 2022 www.intellinews.com