Russian economy outperforms, will shrink 3.5% this year (JPMorgan)
The slowdown in Russia’s economy this year will be much milder than initially expected, with gross domestic product falling just 3.5% in 2022, according to new forecasts from JPMorgan.
Economists at the bank said in a note sent to clients on Friday that Russian economic data for May was stronger than expected, with manufacturing and consumer spending both appearing to stabilize.
“Meanwhile, the labor market shows few signs of distress,” they said. Unemployment fell to 3.9% in May from 4% in April.
Russia has, in part, been able to weather the storm a bit better than expected, as it still exports large amounts of energy. This generated foreign currency with which the government was able to support the rouble, helping to control inflation.
“Beyond the political tensions, the Russian economy offers positive surprises,” JPMorgan said. “For now, Russia is following a much smoother path
than was feared at the start of the invasion.”
JPMorgan raised its 2022 GDP forecast to -3.5% from -5% previously, well above the Wall Street consensus forecast of -9.6%.
However, the investment bank stressed that it was still too early to assess the full impact of the sanctions on the Russian economy, which it said would likely weigh on growth for years.
He also said a reduction in commodity exports could affect the economy. The EU plans to cut 90% of Russian oil imports by the end of the year, and the G7 said last week that it was explore a plan to cap the price of Russian oil. Analysts said these measures could lead to relatively large declines in Russian exports.
Most economists expect the Russian economy to fare worse than JPMorgan. Economists polled by Bloomberg in June said on average Russia’s GDP would fall 9.6% this year, although that was down from an average forecast of 10% in May. They also expect unemployment to rise to 7.4% by the end of the year, from 3.9% in May.