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Major investment banks had expected Russia to suffer serious economic problems after invading Ukraine in February.
But the Russian economy held up longer than expected, prompting them to revise forecasts.
Here are 3 charts showing the resilience of the Russian economy in the six months since the war began.
When President Vladimir Putin’s forces invaded Ukraine in late February, many Wall Street analysts were quick to wait for Russia’s economic downturn. Six months later, they were forced to revise those forecasts.
These dire warnings seemed to become reality in the weeks following the outbreak of war. Western allies imposed economic sanctions, such as bans on oil imports and the removal of the Russian ruble from foreign exchange markets.
But the Russian economy has shown resilience. These 3 graphs show how.
In March, major investment bank JPMorgan said Russia’s gross domestic product would fall 35% in the current quarter from the previous quarter. Goldman Sachs predicted that its economy would suffer its worst contraction since the implosion of the Soviet Union in the early 1990s.
But Russia’s GDP fell by 4% year-on-year in the 3 months to June 30. In fact, its economic expansion slowed at a faster rate after the outbreak of the coronavirus pandemic, when GDP fell by 7. 4% in the current quarter of 2020.
Faced with this, JPMorgan concluded that the Russian had borne the brunt of the harsh sanctions.
The knowledge we have “does not imply a sharp drop in activity, at least for now,” its strategists said recently in a note. recession. “
Stronger-than-expected Russian commodity exports, adding crude oil, helped the economy. The country has also benefited from a strong appeal among its own consumers and a program designed by the Kremlin to keep unemployment low, according to the International Monetary Fund.
“Domestic demand appears to have some resilience thanks to the effect of sanctions on the domestic monetary sector and a weaker-than-expected weakening of the labor market,” the IMF said in July.
Wall Street analysts also predicted that western oil import bans would severely hurt Russia, the world’s third-largest oil producer, the United States and Saudi Arabia.
Its economy is largely based on its energy exports, and oil and fuel revenues accounted for forty-five percent of its federal budget last year, according to the International Energy Agency.
Usa. The US imposed an embargo on Russian energy imports in March, while the EU agreed to a slow ban, which lately affects 75% of Russian oil purchases, in May.
In March, Goldman Sachs said Moscow was unlikely to find other crude oil trading partners, given that its expulsion from the SWIFT banking formula prevented Russia’s central bank from accessing its foreign exchange reserves.
“To illustrate this point, there are no reports of an increase in Chinese purchases of Russian crude, and China has also not increased its imports of Iranian or Venezuelan crude in recent years,” its analysts said.
But Russia still exports 7. 4 million barrels of its oil each day, according to Bloomberg data from July.
India’s purchases of Russian oil played an important role. Its imports rose five months in a row before falling in June. It still absorbs 1 million barrels of Russian oil per day, a 900% increase since February.
And Europe has still controlled itself to put aside Russian crude. The EU still generates 2. 8 million barrels per day, according to Bloomberg data. That’s just a 30% drop from February’s four million barrels in one day.
Wall Street saw nothing but pain for Russia’s output and sectors as Western economic sanctions hit.
In the wake of the invasion of Ukraine, Russia’s composite purchasing managers’ index, which tracks trends in both sectors, has fallen. It rose from 50. 8 in February to 37. 7 in March, with a reading above 50 indicating expansion and a reading below 50 indicating contraction.
Strategists at Goldman Sachs said the contraction was “widespread, with sharp declines in production, new orders and in specific new parts of export orders. “They noted that Moscow is preparing for further falls.
But a few months later, Russia’s composite PMI returned to expansion territory.
The index rose to 44. 4 in April, rose above 50 in June and reached 52. 2 last month. This more recent reading means that Russia’s economic capacity is booming, a cry of catastrophic predictions made on Wall Street.
Read the article on Business Insider