Economists assessed the forecast for the collapse of the Russian economy in 2024

As sanctions tighten, Russia could face a longer and deeper recession than official statements suggest. This is reported by Bloomberg with reference to a closed expert report, intended not for the general public, but for the government. According to the “stress” scenario, in 2024 the Russian economy will collapse by 11.9% and will not return to pre-crisis levels even by the end of the decade. The head of the Ministry of Economic Development, Maxim Reshetnikov, called this information a “working horror story.”

According to Reshetnikov, the material released by Bloomberg reflects analytical calculations showing how the Russian economy will behave, “if we don’t resist, we won’t do anything.” According to the latest estimate of the Ministry of Economic Development, announced by the minister at the Eastern Economic Forum, by the end of 2022, GDP will decrease by 2.9%, and from 2024 it will become a “sustainable plus”. In May, the department spoke of a fall of 7.8%, in mid-August it adjusted the forecast to minus 4.2%, and now it has done it again – with an enviable margin of optimism.

The “non-public report” that Bloomberg writes about presents three forward-looking scenarios. The “target” implies a decrease in GDP (from the level of 2021) by exactly the same 2.9%, by 3.8% in 2023 and by 1.3% in 2024. The “inertial” one says, respectively, about minus 3.5%, minus 8.3% and growth by 3.7%. Finally, the “stress” scenario provides for a fall in the economy in 2022-2024 by 4.2%, 11% and 11.9%. By 2023, the decline will slow down to 3.6%, but the economy will not reach 2021 levels. As the authors of the report note, a complete cessation of gas exports to Europe could cost the budget 400 billion rubles a year in tax revenue, and this amount cannot be replenished through new markets even in the medium term.

So which of these numerous figures – secret and explicit – should you focus on? “Current events have a cumulative effect,” said Mark Goykhman, chief analyst at TeleTrade. – Sanctions bans on the supply of technology and equipment, the withdrawal of key foreign brands from Russia, a drop in incomes of the population and businesses, reducing domestic demand, the outflow of specialists abroad – all these are long-term negative factors for GDP. A serious risk for the economy is a 90% reduction in the physical volume of oil supplies to the EU at the turn of 2022-2023 due to the partial embargo being introduced.”

Less and less money will flow into the state treasury, which will limit the possibilities for investment in production, consumer demand, and economic growth in general. Therefore, the pessimistic forecast scenarios of a “deep recession” considered by Reshetnikov’s department are quite likely. But they are not predetermined with inevitability, says Goykhman. The Ministry of Economic Development is behaving quite adequately, not shrugging off the prevailing difficult circumstances, but recognizing them.

“The country’s oil and gas revenues have already fallen by more than 30% (compared to 2021), and its share in the European gas market has decreased from 50% in January to 9% today,” says Artem Deev, head of the analytical department at Amarkets. – At the same time, it will not be possible to fully compensate for these volumes by redirecting flows to Asia simply due to the lack of the necessary infrastructure, primarily gas pipelines and a fleet for transporting raw materials. According to the results of seven months of the year, the budget deficit amounted to 1 trillion rubles, which is a lot. Given the increased sanctions pressure, the forecasts for GDP, revised by the Ministry of Economic Development towards improvement, look overly optimistic.”

It is already clear that the second half of the year will be much worse than the first in terms of economic indicators. If during the period from January to June, GDP fell by 0.4%, and at the end of the year the fall will be 2.9% at best, this is already a full-scale crisis, says Nikita Maslennikov, a leading expert at the Center for Political Technologies.

In his opinion, the situation in the country and the world is too complex and unstable to single out one of the many scenarios, making it preferable. Forecast indicators may end up infinitely far from reality.

It is not clear what will happen in the fourth quarter with such a critical and extremely unstable parameter as oil and gas exports, on which GDP dynamics decisively depends. As for non-resource exports, they, according to First Deputy Prime Minister Andrey Belousov, will collapse this year by 17%. Imports are recovering very sluggishly and unevenly across sectors.

“There is no particular contradiction between all the presented scenarios,” Maslennikov sums up. – The degree of their feasibility largely depends on whether the eurozone and the UK will face a recession at the end of the year, and if so, how deep and how long it will be. In 2023, the world may well be covered by a global crisis similar to the events of 2008. Russia’s economy then fell by more than 9%, and the recession lasted a year and a half. Why not repeat it now?