Experts named 3 factors that will determine the "turning point" of the crisis

The main risks of the sanctions crisis for the Russian economy are realized in the third or fourth quarter of 2022, the CMASF predicts. They can be expressed in the import of inflation,

The “turning point” in the development of the sanctions crisis in RUSSIA is yet to come, its climax has not yet been reached, according to an analytical note by the Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF) “The First Steps of the Crisis: in the Mirror of the Macroeconomic Forecast”, which RBC read. The main risks with a high degree of probability are realized in the third or fourth quarter of 2022, said Dmitry Belousov, HEAD of the analysis and forecasting of macroeconomic processes of the TsMAKP, one of the authors of the material.

What will influence the development of the crisis

Further changes in the parameters of the state of the Russian economy will occur under the influence of several factors, the CMASF believes. Among them:

State of the balance of payments, as well as the timing and scale of the recovery of foreign trade activity (exports and imports)

Today, the balance of payments is formed based on the fact that the physical volume of exports is sharply declining, and it will not be possible to immediately redirect the volume of energy supplies that traditionally went to the EU to other directions, Belousov noted. In parallel, according to him, prices have risen - both for metals and for hydrocarbon raw materials. However, recently prices have begun to drop a little, and foreign partners will do everything possible to reduce them as much as possible - both for their own survival and to create problems for Russia, the economist is sure.

For example, at the end of June, the G7 countries agreed to consider the possibility of limiting the purchase price of Russian oil. According to BLOOMBERG, they are discussing capping Russian oil prices at $40-60 per barrel.

Russian authorities have ceased to publish data on the EXPORT of goods. However, on July 11, the Bank of Russia announced that the current account surplus in the balance of payments in the first half of 2022 amounted to $138.5 billion, an increase of 3.5 times compared to the corresponding period last year. The 2021 record for a balance of payments surplus ($120 billion) has already been surpassed. The regulator attributed these results to a significant increase in exports due to a favorable price environment and, at the same time, a decrease in imports. According to the Central Bank, the export of goods and services for the first half of the year reached $319.5 billion (37% more than in the same period a year earlier).

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According to the CMASF forecast, in 2022–2023 there will be a large-scale decline in exports relative to the scenario without sanctions: the export of machinery and equipment to unfriendly countries will decrease in physical terms by 50–80% and by 10–20% to other markets, coal exports, taking into account the energy transition will decrease by 10-40% depending on the direction, oil and oil products - by 5-20%, and gas - by 5-10%. Similar effects are expected in the markets of ferrous and non-ferrous metals, as well as fertilizers.

Siluanov assessed Russia's chances to get off the "oil needle" due to sanctions Economics

At the same time, as Russia and its partners adapt to new, crisis and post-crisis economic conditions, imports will recover faster than exports, the CMASF note says. True, you will have to overpay for the import of familiar goods due to the complexity of logistics chains, Belousov warns. There is also a risk that due to the suppression of the supply of critical intermediate imports (raw materials, components), Russian companies will not be able to "master" the expanding space of domestic demand and it will begin to be filled with the import of finished products. This, in turn, will become a factor in the further deepening of the economic downturn, according to the CMASF.

Scale of “import inflation” from food and commodity markets

Such a risk may arise with a partial opening of markets, which will lead to the imposition of "import inflation" on the likely weakening of the ruble and the expansion of demand, follows from the CMASF report.

In June, annual inflation in the eurozone reached its highest ever, reaching 8.6% compared to 8.1% in May, Eurostat reported. In the United States , the rate of price growth during this period accelerated even more - up to 9.1% in annual terms from 8.6% in May (a record for four decades).

In Russia, June inflation was 15.9% yoy, down from May, when it jumped to 17.1%.

For the first time in the history of modern Russia, June deflation was recorded Economics

The Behavior of Russian Companies in the Conditions of the Gradual Ending or Prolongation of the Crisis

We are talking about the ratio between the expenses of companies on investments or on labor, and within the latter - on maintaining real wages or employment, follows from the materials of the CMASF. So far, the situation is normal: in Russia, there are no layoffs of employees that affect the macro-result, Belousov noted. However, output in the civilian sectors of the economy is falling, and in the future a dilemma will arise: either the state subsidizes employment, or companies will start laying off at least mass industrial personnel, the economist believes.

Traditionally, during crises in Russia, companies generally cut salaries, but not workers. In May 2022, the unemployment rate in Russia fell to 3.9% against 4% a month earlier, which was a historic low, but already in June, Minister of Labor and Social Protection Anton Kotyakov announced an increase in tension in the labor market.

“The combination of all these factors with a high degree of probability can materialize in the third or fourth quarter of 2022 and make them much more difficult than the second quarter, which we went through very well. This forecast is the sum of mutually agreed hypotheses and ideas about how the economy works,” Belousov said.

The current economic situation as a whole is developing better than initial estimates, which is largely the result of the implementation of the measures of the government's priority action plan, RBC was told in the press service of the Ministry of Economic Development. At the same time, a number of risks remain, they pointed out: the dynamics of economic development until the end of 2022 will depend on the pace of recovery in consumer demand, the monetary policy of the Bank of Russia, as well as the speed of reorientation of exports and imports, building new logistics chains.

What are the forecasts of other economists

Expectations of the peak of the crisis in the third-fourth quarter of 2022 is a kind of consensus among economists, said Alexander Shirov, DIRECTOR of the Institute of Economic Forecasting of the Russian Academy of Sciences. A number of macro indicators have already begun to deteriorate, but at a slower pace than expected, so it is in the fourth quarter that the strongest contraction of the economy is expected. According to the latest data from the Ministry of Economic Development, Russia's GDP in May 2022 decreased by 4.3% in annual terms after falling by 2.8% in April, Shirov reminds.

Among the factors that will influence this, the expert named the reduction of stocks in trade and production, which will lead to a decrease in output, logistical restructuring, due to which imports will decrease, primarily intermediate products, as well as the halt of an increasing number of investment projects.

The crisis will have an impact on economic activity and the structure of the Russian economy for the next two to three years, if conditions do not begin to change rapidly again, believes Dmitry Kulikov, director of ACRA's sovereign and regional ratings group. Changes will occur in several directions, the expert is sure.

“It is likely that we will see a further shift towards production methods that would hardly be competitive in the absence of barriers to trade and without the exit of multinational companies from the market. Also, the exit from the market or optimization in some organizations, which fundamentally cannot exist in the old way in the new reality, has not been completed. In addition, it is reasonable to expect consolidation in shrinking markets and a change in the priorities and content of government economic policy. Most likely, barriers to foreign trade will become even tougher,” Kulikov notes.

According to the forecast of the Ministry of Economic Development from mid-May, in 2022 the decline in Russia's GDP will be 7.8%. The Central Bank, in its expectations from the end of April, laid down the reduction of the country's economy in the range of 8-10%. Both the regulator and the Ministry of Economy have already announced that they plan to revise their forecasts downwards.