The European Commission predicts a drop in Russian GDP in 2022 by more than 10%
Inflation will be above 20% and the settlement rate will rise by almost 6%
The fall in Russia’s real GDP in 2022 is 10.4%, with its growth over the past year by 4.7%, should from the report of the European Commission with the forecast. High prices and strong demand for commodities, export choices are increasing, shrinking to 14% of GDP in 2022. “This allows us to count on the support of the ruble, a reduction in the population and a reduction in consumption, a restrictive reduction in GDP consumption to 10.4% in 2022,” the report says.
In 2023, the EC predicts the stabilization of the Russian economy as the country adapts to the new reality. At the same time, GDP growth in the next year remains restrained and amounts to 1.5%, since import substitution continues due to the departure of foreign companies and will not be as effective. “Uncertainty about possible economic ties to a dangerous world will continue to undermine confidence and seriously support the growth potential of the economy,” the European Commission.
Inflation in 2022, by forecasts The EC will exceed 20% due to supply-side problems and rising import prices. In 2023, inflation will fall to 10% as there is a beautiful purchasing power and a change in the consumption pattern.
Export of goods and services will collapse in 2022 by 16.1%, and in 2023 it will grow slightly – by 3.9%. Import this year will fall by 25.8%, in the future there will be an increase of 5.4%. Assessment level in 2022 will grow by 5.9%, in 2023 by another 5.6%.
Private investment in 2022, according to the commission’s forecasts, will fall sharply – by more than 20% – given the urgent need for new investments in the current environment and the withdrawal of foreign companies from the Russian market. This does not even compensate for the results of investments, however, import substitution is possible in some segments.
Budgetary installations will be supported by energy exports, while spending will be supplied to support the economy. Budget deficit in 2022 is half a percent of GDP, and will rise to 1.5% in 2023 due to lower commodity prices and the loss of the ability to export them. The government debt-to-GDP ratio will be constrained by inventories due to savings in GDP.
“A sharp drop in the average level of GDP after (the start of the “special operation” – FM) and Western dependence on the level of production for at least a decade, as Russia is forced to change its economic model and move closer to autonomy. In addition, living standards are expected to fall, exacerbating their long-term decline. High commodity prices could ease the economic downturn somewhat and allow for some limited fiscal stimulus.”
European Economic Outlook for Spring 2022, European Commission.