27 Apr 2022 11:04

Russian Econ Ministry expects GDP to fall 8.8% in 2022, inflation to top 20% - paper

MOSCOW. April 27 (Interfax) - Russia's Economic Development Ministry expects the country's economy to shrink by 8.8% in 2022 and inflation to exceed 20%, business daily Vedomosti reported on Wednesday, citing the baseline scenario of the ministry's socioeconomic development forecast.

However, the baseline scenario projects that GDP will subsequently grow by 1.3% in 2023, 4.6% in 2024 and 2.8% in 2025, and inflation to slow to 6.2% in 2023 and 4% in 2024. The ministry presented these forecasts at Tuesday's meeting of the presidium of the government commission to increase the stability of the Russian economy amid sanctions, the paper said.

The ministry's conservative scenario sees GDP contracting by 12.4% in 2022 and by another 1.1% in 2023.

The draft forecast factors in an average annual oil price of $82.60 per barrel in 2022, $75.20 in 2023, $67.70 in 2024 and $61.20 in 2025.

The ministry expects the average annual exchange rate of the U.S. dollar to be 81.40 rubles in 2022, 83 rubles in 2023, 85.20 rubles in 2023 and 86.90 rubles in 2025.

The Finance Ministry proposed at the meeting to revise a number of the parameters of the scenario conditions of the macroeconomic forecast, as it believes the projections for Urals crude prices and the ruble's exchange rate are too optimistic, the paper said, citing a source.

Prime Minister Mikhail Mishustin, who chairs the commission, instructed the ministry to finalize the document and submit the final version of the forecast to the government within two weeks.

The consensus forecast of experts polled by Interfax at the beginning of April, before the sanctions situation worsened even further, projected that GDP would contract by 8.4% in 2022 (with forecasts ranging from a drop of 6.0% to 13%), and subsequently grow by 2.2% in 2022. The consensus forecast for inflation was 22.7% for 2022 and 8.6% for 2023. The subsequent dramatic slowdown of weekly inflation to an almost normal level of 0.2% in April 9-15 could lead analysts to revise their inflation forecasts downward.

The Central Bank of Russia will publish its updated medium-term forecast on April 29. Analysts polled by the Central Bank in mid-April forecast that GDP will fall 9.2% in 2022 and see zero growth in 2023, while inflation will accelerate to 22% in 2022 but then slow to 7.6% in 2023.