MOSCOW (Realist English). The Russian economy’s downturn this year will be much milder than originally expected, with gross domestic product falling just 3.5% in 2022, according to new predictions from JPMorgan.
According to the bank’s analysts, Russia’s economic data for May turned out to be stronger than expected, and the manufacturing sector and consumer spending stabilized. “The labor market displays little sign of distress,” noted in JPMorgan. Unemployment fell from 4% in April to 3.9% in May.
The bank’s experts have raised their forecast of GDP growth for 2022 to -3.5% from the -5%, which was indicated earlier. Nevertheless, the investment bank believes that it is too early to assess the impact of sanctions on the Russian economy, which it said “would likely weigh on growth for years”.
Most economists expect Russia’s economy to fare worse than JPMorgan. Economists polled by Bloomberg in June on average said Russia’s GDP will fall 9.6% this year, although that was down from an average forecast of 10% in May. They also expect unemployment to jump to 7.4% by the end of the year, from 3.9% in May.
It is assumed that a reduction in commodity exports could hit the economy. The EU is planning to cut 90% of Russian oil imports by the end of the year, and the G7 last week said it was exploring a plan to cap the price of Russian oil.
An additional aggravating factor may be the fall in oil prices. Citigroup predicts that in the event of a recession, oil prices may drop to $65 by the end of the year. At the same time, Citi’s baseline scenario, the probability of which is 50%, is that Brent crude will fall to $85 per barrel by the end of the year.
