What will happen to the Russian economy in the next two years, according to ACRA

The rating agency ACRA has published its forecast for the development of the Russian economy over the next two years. The estimates presented in it are tougher than in the state forecasts. The agency expects a prolonged decline in industrial production, a more significant depreciation of the ruble, and a slow recovery of the economy with higher inflation. It also forecasts a reduction in the labor force, including due to factors around the war. In its forecast for 2022-2024, ACRA assumes that oil prices will remain high: $82 per barrel in 2022, $77 in 2023 and $75 in 2024. World GDP growth in the next two years will be very low (1.1% in 2023 and 2.5% in 2024), and China's GDP dynamics will be almost catastrophic (2.1% in 2023 and 4.4% in 2024). But the long-term recession of the EU countries and the U.S., according to ACRA analysts, will be avoided, although the risk of a global recession remains high. The main thesis of the agency's forecast, which distinguishes it from government forecasts: the global economy will not be a driver of growth of the Russian economy - due to restrictions on Russian exports and due to its own slowdown. On this basis, ACRA forecasts a more significant drop in GDP than the authorities. According to the agency, in 2022 GDP will decrease by 4%, in 2023 the fall will slow down to 2.8%, and the recovery in 2024 will be weak - only 1.3%. The expected decline of Russia's GDP by a total of 6-8% over 2022-2023 will be due to a supply shock rather than a demand shock, ACRA notes. Therefore, the recovery will occur not because of the return to circulation of unused means of production, but through the creation of new or changing existing ones. And this takes much longer than a cyclical recovery, even in the absence of complications in the external environment, the analysts conclude. This rules out the authorities' thesis of a rapid restructuring of the Russian economy, which will take up to two years. ACRA forecasts inflation at 12.5% by the end of the current year, 6.9% next year, and 5% in 2024. The Central Bank expects a return to the target of 4% in 2024. The agency generally agrees with the thesis of a low decline in investment, although in this matter, its forecast is also tougher than the official. ACRA provides pessimistic assessments for the industrial production, predicting a decline of 3.8% in 2022 and 2% in 2023 by 2021. The agency also predicts an increase in the budget deficit from 1.5% in 2022 to 2.8% in 2023 and 2% in 2024. In addition, the agency expects somewhat more than the Central Bank and the Ministry of Economic Development, the weakening of the ruble and higher interest rates on loans in the economy. In addition, ACRA expects a significant reduction of the workforce in Russia (by 2.1% by 2024 in the conservative scenario) - due to demographic trends and near-war factors (increased mortality and injuries, reduced civilian employment, emigration). As a result, unemployment will be ultra-low and real wages will grow (however, real disposable income is projected to increase only in 2024 and by only 1%. ACRA's forecast is the first publication of a non-governmental medium-term forecast, the number of which this year will be noticeably lower than usual, notes Kommersant. ACRA analysts are traditionally tougher and looser in their assumptions than analysts at the Central Bank and the Ministry of Economic Development, since the rating agency has to take all risks into account in order to maintain its reputation.