Did not wait: Russia repelled an unprecedented blow, by Elena Savelyeva for RIANOVOSTI. 02.24.2023.
For a whole year now, the country has been under powerful pressure. Sanctions, the exit of Western companies, the destruction of supply chains, the freezing of reserves - in the West, they were sure that Russia would soon collapse. However, the economy persevered, shrinking by only 2.5%. How it was possible to overcome such a difficult period with minimal losses and what to expect next - in the material of RIA Novosti.
The crash didn't happen
In the spring of 2022, the forecasts of the leading financial institutions were amazing. Thus, Goldman Sachs predicted a collapse of the Russian economy by ten percent, the World Bank - by eleven.
Economists at the European Bank for Reconstruction and Development have warned of the country's deepest recession in 30 years. Capital Economics was expecting a fall of 12%, and the analytical center of the Institute of International Finance (IIF) - 15%.
The Bank of Russia was also pessimistic: minus 8-10%.
All key macroeconomic parameters, of course, should have deteriorated. They predicted exorbitant inflation - 23%. Indeed, in April it reached 17.8%, but at the end of the year it was 12.4%. In 2023, they expect a return to the target 4%.
There was no shortage of foreign trade at all. On the contrary, the surplus doubled. The positive balance in January-November is $269.8 billion, 1.9 times more than a year earlier.
The country's economy has demonstrated a very high margin of safety. GDP decreased by only 2.1%, Rosstat summed up. The assessment of the Central Bank is 2.5%.
The International Monetary Fund acknowledged that Russia suffered less from the sanctions than expected, and growth will begin as early as 2023.
Real sector
Production has not collapsed. Although the logistics chains built over the years collapsed, exports were quickly reoriented.
The peak of the decline in the index of industrial activity occurred in the second quarter against the backdrop of the main wave of Western sanctions. But since mid-summer, the dynamics have been positive. In November, the indicator reached its highest level since 2017. At the end of the year - only minus 0.6%.
"The key factors that made it possible not to collapse GDP are the contribution of two large sectors, agriculture and construction, which together added 1.2%, while the rest of the sectors combined gave minus 5.5," says Evgeny Shatov, partner at Capital Lab.
The development of the real sector is also evidenced by a strong increase in capital expenditures - 6%, while a decline of 20% was expected. Large and small companies spent money on replacing imported equipment and software, and restructuring logistics for alternative markets.
The departure of Western companies freed up many market niches, and business immediately took advantage of this. New private enterprises were also created - this was facilitated by state loans and subsidies.
"Russian companies have had to endure what the Central Bank calls a “structural transformation” of the economy besieged by sanctions. Therefore, the predictions of an imminent economic collapse that sounded at the end of February 2022 did not come true,” writes Bloomberg .
Oil and gas revenues
In particular, the oil and gas sector helped attract capital to the budget of the government and companies, providing businesses with a powerful source of investment. The main Russian exports were only going up in price, primarily hydrocarbons. While physical sales volumes have declined, revenues have increased.
"Production capacities and communications were supported by state orders. They planned to allocate 29 trillion rubles from the budget, as a result, it turned out to be 31.1. This contributed to the adaptability of the economy,” points out Vladimir Kovalev, an analyst at TeleTrade.
The Ministry of Finance calculated: the treasury received 10.7 trillion rubles from the sale of hydrocarbons. In general, the budget in January-November was executed with a surplus of 557 billion. Revenues - 24.7 trillion, 99% of the figure approved in the law for 2022-2024. The Ministry of Finance estimated expenses for 11 months at 24.2 trillion.
Experts predict that the reduction in the supply of oil on the world market will raise quotes to $100-120 per barrel and higher.
Ruble under control
The initial shock of the spring of 2022 was smoothed out by the government’s economic bloc with prompt and precise actions.
"A full-scale monetary and financial crisis could disorient the economy, lead to the collapse of the banking system, very strong inflation and devaluation. This was not allowed," Kovalev notes.
The Central Bank not only stabilized, but also strengthened the ruble to a record high, maneuvering the key rate and introducing a number of restrictions on the foreign exchange market.
As a result, the national currency practically did not react in any way to the consistent tightening of Western restrictions, the freezing of reserves, and prohibitions in the oil and gas sector.
The fluctuations were strong - from 120 to 50 per dollar. But in the end, the ruble surprised the whole world and was in first place among the 36 major currencies in the ranking of changes in value against the US dollar.
What's next
It is too early to talk about a confident recovery. This year will be difficult, especially the second and third quarters. The risks of economic contraction and the delayed effect of sanctions remain. With the current negative dynamics, we have a safety margin of about a year and a half.
"The financial sector will most likely make a positive contribution due to the low base of 2022," Yevgeny Shatov believes.
"Due to sanctions, embargoes, difficulties in redirecting hydrocarbon flows from Western markets, a reduction in energy production is likely. A rather significant factor is a decrease in domestic demand,” adds Kovalev.
However, analysts emphasize, reserves, budget allocations, and alternative imports will help.
The Ministry of Economic Development expects a minimum decrease in GDP in 2023 - 0.8%. But global financial institutions are now even more optimistic than the Russian government. According to the February estimates of the International Monetary Fund, the country's economy will add 0.3% this year.
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