JPMorgan said Russia’s economy seems to be faring better than expected, despite the Ukraine war and sanctions.
The Wall Street bank said business sentiment surveys from the country “are signaling a not very deep recession.”
JPMorgan had predicted a 35% drop in Russian GDP in the second quarter, but now thinks the fall will be less dramatic.
The Russian economy has so far fared better than expected under tough sanctions and is likely to suffer only a shallow — although drawn-out — recession, according to JPMorgan.
The Wall Street bank said business sentiment surveys from the country “are signaling a not very deep recession in Russia, and therefore imply upside risks to our growth forecasts,” in a note sent to clients last week and released publicly Monday.
The US and its allies slapped tough economic sanctions on Russia in late February after Vladimir Putin’s troops invaded Ukraine. The stringency of the measures prompted forecasters to predict a dramatic slowdown in Russia’s economy.
In March, JPMorgan forecasted that Russian gross domestic product would contract 35% quarter-over-quarter in the second quarter, and 7% for the year. The IMF expects Russia’s economy to shrink 8.5% in 2022.
Yet the bank told clients last week that the country’s economy is in better shape than expected, judging from business surveys and high-frequency indicators such as electricity consumption and financial flows.
“The data at hand therefore do not point to an abrupt plunge in activity, at least for now,” JPMorgan’s analysts wrote. They said GDP in the second quarter would likely be better than predicted in March.
To be sure, JPMorgan said Russia’s economy is far from where it would be if the invasion hadn’t happened. It said export orders are doing particularly badly, and companies expect more pain down the line.
“The impact of sanctions will continue building in coming quarters, we expect,” JPMorgan said. “The GDP profile, therefore, looks increasingly likely to be consistent with a drawn-out, but not very sharp recession.”
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