Page 20 - GEORptOct22

remain high for a while, this will have to happen, so inflation will increase,” Javorcik told listeners.
“We are not very optimistic about food prices coming down either. If you look at the futures market, they are expecting food prices to be higher in 2023 than they are today.
“We also see that producer costs have increased in pretty much all out countries of operation faster than consumer inflation, which suggests firms are not yet passing all increases in costs on to the retail customers.”
Ukraine faces 30% contraction and muted recovery
Ukraine’s economy has been devastated by the war, and the EBRD kept its forecast for 2022 unchanged at a 30% contraction, while as the war drags on with no end in sight it now expects a “more muted” recovery of only 8% in 2023. Previously, the EBRD had anticipated 25% growth in 2023, assuming that the recovery would already be underway.
Meanwhile, the EBRD has revised upwards its 2022 forecast for Russia to a contraction of only 5% in 2022, followed by a 3% contraction in 2023. Professor Sergei Guriev, Sciences Po provost, noted during the presentation that Russia has not – as initially expected after the invasion – entered a macroeconomic crisis, while policymakers have managed to hold inflation in check, helped by the stronger ruble.
However, he pointed out that the strong ruble “is not a proxy for strength, it reflects a decline in imports”. Russia has been unable to substitute all the high tech inputs it is now no longer able to get from the West from alternative suppliers such as China.
Javorcik forecast a more severe impact on Russia from the EU sanctions on Russian oil due to come into force in November.
“I think [Russian President Vladimir] Putin’s plan is to blackmail Europe during this very difficult winter, but it comes at a huge cost to the Russian budget,” Javorcik said. Moreover, she added: “The real shock will come later – the oil embargo coming in in two months will be a real test ... oil matters more than gas for the Russian budget and Putin’s ability to continue this war.”
20 GEORGIA Country Report October 2022 www.intellinews.com