Russian Econ Ministry improves 2020 GDP decline forecast to 3.9%, expects to reach pre-crisis level in Q3 2021
MOSCOW. Sept 14 (Interfax) - Russia's Economic Development Ministry has submitted a revised macroeconomic forecast to the government that has been endorsed by the Finance Ministry, a source at the ministry told reporters, commenting on the forecast that the ministry presented at a meeting of the government's budget commission last Thursday and which will serve as the basis for the budget.
The source said the ministry has improved the forecast for the decline of Russia's GDP in 2020 to 3.9% from 4.8% in the June version. It has also raised GDP growth forecasts to 3.3% from 3.2% for 2021 and to 3.4% from 2.9% for 2022, and revised the growth forecast for 2023 to 3.0% from 3.1%.
"The crisis has not taken on a systemic nature, it turned out to be localized within small and medium enterprises in a denumerable number of sectors. Yes, there are fairly large sectors there - retail, and food services, and consumer services, and passenger transport, production of consumer goods - but this is nonetheless a denumerable number of sectors. This crisis did not grow into a crisis of nonpayments, did not spread in chain reactions, but turned out, after all, to be localized and we are now seeing a fairly noticeable recovery," the source said.
"The second thing is that we managed to maintain macroeconomic stability. Yes, inflation rose a little, [to] 3.6% in August, but this is because demand is recovering and, for the most part, the spring weakening of the ruble did not fan inflation. Moreover, we believe that in the current situation the risks for macroeconomic stability from external factors are limited," the source said.
The economy will recover to the pre-crisis level in the third quarter of 2021, the source said, meaning compared to the average quarterly level of 2019.
The ministry now expects average annual prices for Urals crude to be $41.10 in 2020, $45.30 in 2021, $46.60 in 2022 and $47.50 in 2023, compared to, respectively, $39.90, $43.30, $45.60 and $46.50 in the June forecast. As usual, the ministry factored in the current OPEC+ agreement to curb oil production, assuming the deal will last until the end of April 2022.
The ministry expects industrial production to fall by 4.1% in 2020, and then grow 2.6% in 2021, 3.6% in 2022 and 2.3% in 2023. The manufacturing sector is expected to contract by 1.5% in 2020, while extractive sectors are expected to see a drop of 7.8% due to the OPEC+ deal. The ministry expects production in extractive sectors to grow by 5.2% in 2022 due to the end of the OPEC+ deal that year, while manufacturing is forecast to grow by 3.1%.
The forecast for the decline of retail sales in 2020 has been reduced to 4.2% from 5.2% in the June version. Retail sales are expected to grow by 5.1% in 2021, 2.9% in 2022 and 2.8% in 2023.
The ministry has also improved its investment growth forecast for 2020 to negative 6.6% from negative 10.4% in June, and expects investment to climb 3.9% in 2021, 5.3% in 2022 and 5.1% in 2023.
Real disposable household incomes are now expected to fall 3.0% in 2020 instead of by 3.5%. The ministry expects real disposable incomes to rise by 3.0% in 2021, 2.4% in 2022 and 2.5% in 2023.
It now expects real wages to increase by 1.5% in 2020 instead of fall by 3.6%, and forecasts growth of 2.2% in 2021, 2.2% in 2022 and 2.5% in 2023.
The forecast for average annual unemployment has been left unchanged at 5.7% for 2020. It is expected to drop to 5.2% in 2021, 4.7% in 2022 and 4.6% in 2023.
Russian visible exports are expected to total $321 billion in 2020 and grow to $355 billion in 2021, $382 billion in 2022 and $403 billion in 2023. Imports are forecast at $235 billion in 2020, $250 billion in 2021, $267 billion in 2021 and $285 billion in 2023.
The current account surplus is expected to be $30 billion in 2020, $29 billion in 2021, $31 billion in 2022 and $29 billion in 2023.