Russia’s economic downturn continues-Reuters
2022.12.02 08:44
Russia’s economic downturn continues-Reuters
Budrigannews.com – On Friday, according to Reuters, the Russian economy will shrink by 2.5% in the coming year, in addition, by 3.2% in 2022. The central bank would have only a limited number of opportunities to lower interest rates due to stubbornly high inflation.
After tens of thousands of troops were deployed to Ukraine on February 24, the West imposed serious restrictions on Russia’s energy and financial sector, including partially freezing its reserves, and many enterprises left the market. Since the Russian economy is showing more stable dynamics than expected, experts and managers gradually raised their forecasts when initially a gloomy prediction was made about a double-digit drop in GDP.
Analysts at the beginning of December predicted that the Russian economy would decrease by 3.0 this year, which was close to the forecast of the Ministry of Economic Development by 2.9. The same survey, which was conducted in early December, expected a decrease of 3.5%. However, analysts now predict a 2.5% decline in 2023 if the decline continues at the same pace.
Over time, economists recognized the reduction, perhaps less sharply, but more prolonged than initially expected. On Friday, at a conference held in Moscow, the chief economic economist of Alfa-Bank Natalia Orlov said that Iran’s experience shows that the sanctions act gradually, and it can initiate the activation of economic activity in the first six months, when the economy adapts.
Orlova said that the fall is not as big as we initially thought, and this does not mean that next year we can safely enter. “It is impossible to exclude an increase of 5-6 in the next year, which will be more serious than 2022.
In order to reduce the risks of financial well-being, the Bank of Russia increased the key interest rate from 9.5 to 20, before proceeding with a series of cuts to 7.5.
According to the survey, after maintaining the rate on December 16, the bank will continue to soften monetary policy until 2023, and the key rate level will be set at the end of this year at 6.75%. The survey indicates that the ruble will trade at the rate of 74.00 in a year compared to the dollar, and not at the rate of 77.50 predicted by analysts in November.
As of Friday, the official exchange rate was 61.15 rubles per dollar. Mikhail Poddubsky, asset manager of ICB Investments, believes that the key moment for the ruble in the coming months may be the introduction of the EU oil embargo mechanism on December 5, as well as the introduction of an increase in oil prices.”
However, although Poddubsky expected a moderate decrease in the physical export value of oil, he noted that capital controls, as well as a significant surplus of Russia’s current accounts, may have a slight impact on the ruble.
According to the survey, in 2021, inflation, which causes serious concern to Russian residents, is expected to rise to 12.1 from 8.4. Russia plans to make inflation 4 percent.
