The Russian economy is holding up better than expected to Western sanctions related to Ukraine, JPMorgan Chase said in a note to clients dated last week and made public on Monday.
According to the largest US investment bank, the country’s business climate surveys “signal a not very deep recession in Russia, and therefore imply upside risks to our growth forecasts.” He also cited high-frequency indicators such as electricity consumption and financial flows, which signal that the economy is doing better than expected.
“The data we have therefore does not indicate a sharp drop in activity, at least for now,” say the bank’s analysts in the note, quoted by Business Insider.
JPMorgan also reversed its earlier forecast of a 35% decline in Russian GDP in the second quarter and 7% for 2022 as a whole, now saying the numbers should be much less alarming. The bank, however, noted that the impact of current and potential sanctions will be felt and that the country’s economy would be in much better shape if Moscow had not launched its military operation in Ukraine.
“We expect the impact of the sanctions to continue to strengthen over the coming quarters. The GDP profile therefore looks increasingly likely to be consistent with a prolonged, but not very pronounced, recession,” predict analysts, noting that export orders show a particular decline.
Russia has faced unprecedented economic restrictions since it launched a military operation in Ukraine, drawing intense condemnation from the West. The United States has, among other measures, imposed an embargo on Russian oil, one of the country’s main export products, while the EU is currently preparing its sixth sanctions package and also considering an oil ban. Russia has been cut off from the SWIFT interbank messaging system, while banks, organizations and individuals have been sanctioned, and assets comprising half of the country’s foreign exchange reserves have been frozen. Russia responded with countermeasures and succeeded in bringing the national currency, the rouble, back to its pre-conflict level after a historic fall, but there is still a lot of uncertainty among analysts about the future of the economy.
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