Gorodnichenko, on YahooFinance:
Moscow’s economy is heavily dependent on petrodollars, or dollars earned through the oil and gas trade, Gorodnichenko said. However, as Russia’s power flows through the lifting of sanctions, it is unclear whether sales to friendly countries will be enough to fund the Kremlin’s massive war budget — or if Russia will have enough access to dollars to easily import all the goods and services its economy needs, he said.
That could put the Russian economy on the fast track to recession in the next 12 months, Gorodnichenko predicted.
“If they have to finance the war and do not have these resources, it is not clear where they will spend this money,” he added. “I predict that they will experience a severe recession.”
BOFIT notes that sanctions have been tightened on oil exports, while new EU sanctions on natural gas have been implemented.
The IMF’s July WEO update (released today, but based on April 22-May 20 exchange rates) shows that, while there was no downward revision to growth in 2024, 2025 was marked down by 0.3 ppts, to 1.5% y/ y (World Bank forecast for June is 1.4%) This is despite marked high oil prices. If, on the other hand, oil prices fall, then one can expect conditional, slow growth.
BOFIT’s latest assessment of economic challenges was July 5.
Here are some pictures of the latest financial conditions. Note that the policy rate remains high, at 16%.
We do not know what the ex ante real policy rate is due to the absence of a good measure of expected inflation. If we consider variable expectations (lagged inflation in y/y is a proxy for current expected inflation), the real policy rate is positive.
In June y/y inflation is 8.6%, the actual policy rate is 7.4%. A high real rate stabilizes money, and tends to prevent inflation, but at the cost of depressing economic activity in interest-bearing sectors.
Although the reported GDP growth (y/y, up to May) is good at around 4%, if one had spent on defense and security, the growth would have been much lower. I haven’t done this calculation for 2023 or 2024, but here is a calculation based on estimates and predictions for 2023.
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