© JPMorgan warns that Russia is heading for 1998-esque ‘collapse’ in economy (Bloomberg) — JPMorgan (NYSE:)’s JPM analysts begin to reckon with mounting disruptions to Russian exports, latest count Damage from US banking sanctions demonstrating the “collapse” of the economy could be similar to the effects of the country’s bankruptcy in 1998. A “peak-to-trough” crash in Russia’s gross domestic product is now expected at about 11%, “in line with the decline in the 1998 debt crisis,” JPMorgan economists said in a note to customers. Sanctions imposed on the central bank, in addition to the shutdown of the global SWIFT messaging system, created according to JPMorgan obstacles to Russia’s ability to sell oil and gas “Russia’s export earnings will be disrupted and capital outflows are likely to occur immediately despite the large surplus hot on the current account,” they said. “Imports and GDP will collapse.” President Vladimir Putin’s invasion of Ukraine has unleashed uncertainty in global oil markets, with buyers refraining from doing business with Russia as the US and others seek to isolate it from financial markets. Traders are offering Russia’s flagship crude oil at a record discount in an effort to attract buyers. The unprecedented restrictions on the Bank of Russia, meanwhile, have captivated its ability to keep the , which has already fallen more than 30% against the dollar this year. Instead, policymakers have more than doubled key rates to 20% and tightened capital controls. “Downward pressure on the ruble and capital flight are forcing the Russian central bank to drastically raise interest rates and impose capital controls,” JPMorgan analysts said. Sanctions undermine the two pillars that promote stability: the central bank’s ‘fortress’ foreign exchange reserves and Russia’s current account surplus. Oil and gas revenues have provided Russia with a hard currency lifeline as energy sales and transportation largely escaped direct disruption. Russia had a monthly current account surplus of about $20 billion at the start of the year. The Biden administration still opposes a ban on oil imports from Russia, though its objections put it at odds with a bipartisan call to punish Moscow for invading Ukraine. JPMorgan now expects the Russian economy to contract by 7% this year, down from its earlier forecast of a 3.5% decline. It sees a 10% year-over-year decline this quarter, seasonally adjusted, followed by a 35% decline in the next three months. “The sanctions will leave their mark on the Russian economy, which now appears to be heading for a deep recession,” the analysts said. Disclaimer: Fusion Media would like to remind you that the data on this website is not necessarily real-time or accurate. All CFDs (Stocks, Indices, Futures) and Forex prices are not provided by exchanges but rather by market makers, and therefore prices may not be accurate and may differ from the actual market price meaning prices are indicative and not suitable for trading purposes . Therefore, Fusion Media does not bear any responsibility for any trading losses that you may incur as a result of using this data. Fusion Media or anyone associated with Fusion Media accepts no liability for any loss or damage resulting from reliance on any information, including data, quotes, charts and buy/sell signals on this website. Be fully informed about the risks and costs associated with trading the financial markets, it is one of the riskiest forms of investment possible.
