Goldman and Barclays cut outlook for Russia in 2022, see double-digit decline
(Bloomberg) – Economists at Barclays Plc and Goldman Sachs Group Inc. have lowered their forecasts for Russia and now see a double-digit contraction in output this year, the latest in a series of revisions that factor in the severity increased sanctions over the invasion of Ukraine.
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Barclays issued one of the most bullish views yet, reversing previous calls for growth and predicting a contraction of 12.4% in 2022 and a further decline of 3.5% the following year. Goldman has lowered this year’s forecast and now expects a 10% fall, down from a 7% decline seen earlier.
“Due to current geopolitical conditions, we assume the sanctions will be long-lasting,” Barclays economists, including Brahim Razgallah, said in a note.
“The economic downturn will be gradual and will accelerate by mid-2022 as the consequences of the sanctions will fully trickle down to the economy,” they said. “We expect the economic contraction to be driven by lower private consumption, investment and imports.”
Just over three weeks after President Vladimir Putin ordered the Russian military to attack Ukraine, an economy that was poised to grow for a second year is sinking into its deepest downturn this century.
Putin has warned the country faces rising unemployment and inflation as it adjusts to what he described as an “economic blitzkrieg” of international sanctions. Bloomberg Economics’ initial forecast predicts that Russia’s full-year GDP will fall by around 9% in 2022.
Goldman economists led by Clemens Grafe said in a note that “Russia’s exports are more severely disrupted than we initially assumed,” accounting for about half of the downside revision to the outlook for Russia. Bank. Goldman’s base case is that Russia’s gas exports will continue uninterrupted, but its oil shipments will fall by almost 20%.
It now expects exports to fall 20% sequentially in the second quarter and 10% for the year. Goldman also assumes a 20% drop in import volume in 2022.
At the same time, the products that Russia exports rely on few imported parts, according to Goldman. In the case of mining, the sector depends on imports for only about 7% of its intermediate purchases of goods and services, he said, citing the latest data available for 2019.
“The impact of trade sanctions on Russia is unlikely to be as damaging to the economy as it would be to other economies more integrated into global supply chains,” Goldman said.
The US bank predicts a “slow recovery”, with growth already turning positive next year. GDP is expected to grow 2.4% in 2023 and 3.4% in 2024, he said.
The outlook is much less dire for Russia’s finances. With no new trade restrictions and high commodity prices, Barclays believes Russia will be able to fund its major spending needs.
According to Goldman, Russia’s current account surplus is improving slightly despite sharp declines in imports and exports.
He now expects the current account balance – the broadest measure of trade in goods and services – to reach a record $205 billion for 2022, assuming Russia continues to service its debt and authorize the payment of dividends.
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