Posted on 07/06/2022 11:50:34 AM PDT by Mount Athos
Russia appears on track for a much shallower recession than many forecasters initially expected this year, boosted by rising oil production that has blunted the impact of US and European sanctions over its war in Ukraine.
Economists from JPMorgan Chase & Co., Citigroup Inc. and other big banks are slashing their outlooks for the drop in output this year to as little as 3.5%, dismissing fears in the first months after President Vladimir Putin’s invasion of Ukraine that it could be the deepest in a generation.
Officials in Moscow, some of whom saw a contraction of as much as 12%, are now preparing to improve forecasts to less than half that.
“The boxer is now moving again after being knocked down,” said Anton Tabakh, chief economist at Moscow-based credit assessor Expert RA. “There was a knockdown, but it’s been offset substantially by comfortable export prices, even with the discounts, and the budget’s capacity to pour money on the problem.”
The improving outlook is adding to Kremlin confidence that it can weather the sanctions onslaught from the US and its allies even as leaders in those countries face increasing pressure from surging energy and food prices, trends the war has worsened. Momentum for new restrictions is running into growing opposition there with few politically palatable options left.
To be sure, Russia’s economy is still facing the sharpest contraction since at least 2009. Many forecasters warn that this recession could last longer than past ones, with the impact of restrictions on key technologies and other products growing over time. Already, the auto industry has all but shut down, with car production off 97% in May amid shortages of parts and the departure of major foreign producers.
But across other parts of the economy, the worst fears have yet to materialize as quick moves to stabilize the currency in the first weeks after the war prevented a financial crisis and a flood of export earnings followed.
Companies reported the first broad increases in output and in their outlooks in June, S&P Global reported Tuesday.
“Russia is tracking a far milder recession than had been feared when the invasion began,” JPMorgan economists wrote this week, cutting their expected contraction to 3.5% this year from the 7% they expected in March.
Industrial production was up 1.7% in May from the previous month, according to seasonally adjusted data from the Development Center at Moscow’s Higher School of Economics. “The break in the contraction in May could be a sign that producers have initially adapted to the shock of anti-Russian sanctions,” the center said.
A big driver has been a rebound in oil production, which dropped after the invasion but was up 7% in June from those lows thanks to domestic demand and a shift to export buyers in Asia.
Gas output, another key economic engine, was down, but prices have spiked, fueling revenue gains.
“We are not at the level of stress that we had assumed for 2022,” Rosbank economist Evgeny Koshelev said. “We should expect better trends because both budget and monetary policies are overall stimulative.”
Restrained Recession?
Retail sales are down about 10%, but the drop appears to have stabilized in a sector that accounts for about half the economy. Consumer confidence has picked up and unemployment remains at record lows. Data from cash registers show purchases in late June picked up to pre-war levels, Economy Minister Maxim Reshetnikov told a government meeting Tuesday. “But it’s early to talk about stabilization,” he said.
Imports, which plunged 40% in April, have also showed signs of steadying.
The government has also stepped up spending on welfare programs and military procurement, giving an added economic boost. The central bank has reversed all the rate hikes imposed since the invasion.
“Activity indicators suggest that there is significant upside” to our 7% decline forecast for this year, Goldman economist Clemens Grafe said in a research note.
Still, forecasters warn of substantial uncertainty about the outlook. Quicker-than-expected imposition of limits on Russian energy in Europe could hit revenue in the second half, as could a drop in demand if fears of a recession prove justified.
Signs of tightening inventories in Russia in recent months may mean sanctions pain will deepen as supplies run out. Ruble strength could lead exporters to cut production as they’re priced out of markets.
“There are grounds for optimism,” said Natalia Lavrova, chief economist at BCS Financial Group in Moscow. “The risks are somewhat lower for 2022, but they also have moved to 2023 because of the oil embargo,” she said, referring to EU plans to restrict imports next year.
Yea, well...that’s not how the West ptched this. Skyrocketing prices in the west in exchange for a bad airline industry in Russia. Who would have gone for that?
Russian industry will come out of the sanctions with far less dependence on foreign parts and will make serious gains in certain sectors. All the Western sanctions nutjobs did was cut off their own noses to spite their faces.
High oil prices and Economic domination of Russia.
You get one of those, not both.
You are such a Putin ‘Puffer’ for posting this! <\Super Sarcasm>
Am I reading this right. The only ones paying the price for sanctions against Russia are US taxpayers… and maybe some Europeans?
I wonder how much of the $5.00-$7.00 we are paying for a gallon of gasoline is going toward paying for Russia’s Special Military Operation in Ukraine.
It seems to me that our government dislikes Donald Trump more for winning the Presidency than they do Vladimir Putin for invading Ukraine.
We’re getting, by far, the worst end of the sanction war. But, the Biden regime is too stupid to call it off.
It serves the Biden Regime’s purpose. It helps in the destruction of the United States. Which was/is his sole and only goal.
Russia’s Ruble - The Strongest Currency In The World This Year 2022
JUN 27, 2022 BY DAISY-MAE SCHMITT.
How’s that working out?
EU certainly is paying the price. Natural Gas up x6. As expected the west has shot itself in the foot partly due to incoherent green energy policies and partly due to Biden’s capacity to F* things up.
I do not see any prospect for Russia to "make serious gains in certain sectors" unless one has in mind the increased repression, corruption, and gangsterism that defines Putin's Russia. In spite of Putin's nostalgia for the Soviet era and its ways and an abundance of export earnings, Russia now lacks the industrial, technological, and human skills and personnel to "make serious gains" in any sector of its economy. And even as Russia grinds out territorial gains through massed artillery barrages, it acquires a devastated landscape of little productive value that will take massive investment to rebuild.
You forget, they have access to China, India, Brazil, and others who are liking the WEF’s Great Reset less and less. You’re only your logically works if America remains top dog with a global reserve currency and that’s not going keep remain for much longer.
America's core economic and technological alliance consists of not just the US, but also Canada, the European members of NATO and the EU, Israel, Japan, South Korea, Taiwan, and Australia. These are the world's leading developed nations and technology powerhouses. Together they have a population of over a billion people with a high degree of education and skill and a common attachment to democracy.
Due to large regional disparities in development, even China, India, and Brazil added together have a total developed developed economy and population than is perhaps a third that of the American alliance.
If the US dollar is to lose its status as the world's preferred trade and reserve currency, it will do so gradually to a better alternative and none are in the offing. Since China and Russia are notoriously self-interested and frequently predatory, they and their currencies are disqualified. In addition, Russia's economy is too small and too reliant on natural resources, and China's economy is stagnating due to an aging demographic, an over-reliance on exports, and the middle income trap.
Most of all, the dollar rules because the US has a unique combination of economic, financial, political, military, technological, institutional, and cultural power. And when friendly countries are in trouble, the immediate instinct of the US is help them. Russia and China though see weakness as an opportunity to exploit another country.
Like I said, nothing lasts forever and the West is led by clowns. I am certain that the Romans had no fear of the German tribes and were happily punishing them for whatever transgressions they thought were important. Then the German tribes tore them apart. Spin that.
While democracies sometimes pick clowns and fools for leaders, in a crisis they tend to shape up or get replaced by better leaders, sometimes from unlikely origins and marginal backgrounds. Most of all, democracies tend to have remarkable resilience and unexpected depth of resources that confound their enemies.
Hopium is a helluva drug. We live under an oligarchy in the West. It is a sham democracy that abuses its citizenry through modern mass propaganda and bread & circuses. Rome allowed the plebeians to vote but then aristocracy did what they wanted - right up to the end when the barbarians at the gate seemed no worse than the depraved animals that ruled Rome.
The Romans failed internally. I agree that no empire lasts forever, because human beings, including those in politics, are pretty flawed people.
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