The Central Bank of Russia has presented two primary scenarios for the future development of Russian exports, which are currently contracting. One scenario involves the revival of exports, while the other entails a shift towards the domestic market. Experts believe that a combination of these scenarios will likely be operative to varying extents. However, the redirection towards the domestic market is subject to certain constraints.
The first scenario suggests that the decline in export volumes is temporary and attributed to adaptation to changing conditions, as well as complications in settlement and logistics. Over time, as adaptation to these constraints occurs, exports will gradually recover, taking into account global economic growth.
In the second scenario, the reduction in exports is a response to structural changes in conditions, and the recovery in the near term will be limited. In such a situation, a portion of export volumes will be redirected towards the domestic market, potentially acting as a deflationary factor due to increased supply. To some extent, these processes are already observable in certain regions of Russia.
In 2023, Russian export volumes significantly decreased compared to the previous year, largely due to the high base effect. As a result, the value of exports from Russia in 2023 amounted to $425.1 billion, 28% lower than in 2022. Conversely, imports to Russia increased in 2023, reaching $285.1 billion, nearly 12% higher than in 2022. This has led to a reduction in Russia's trade surplus.
According to forecasts by the Ministry of Economic Development, the primary risk to further economic growth is the slowdown in the global economy, posing risks for both export-oriented industries and the Russian budget, particularly concerning oil and gas revenues.
Experts surveyed by RBK indicate that both scenarios presented by the Central Bank will be realized in one form or another. On one hand, adaptation to new conditions will lead to the restoration of export volumes. Russia has already demonstrated the ability to successfully find alternative ways to supply its goods to foreign markets. However, one negative consequence of lengthening logistical chains is the increasing transaction costs and, consequently, a decline in exporters' revenues. Nevertheless, the state possesses mechanisms to reduce these costs, such as lowering export restrictions. Products likely to regain their volumes in foreign markets include fuel, metals, fertilizers, and foodstuffs—directions where successful reorientation to "friendly" markets is occurring.
Simultaneously, a portion of export goods will still need to be redirected to the domestic market. These may include products with higher degrees of processing, such as machinery and equipment, metal products, and chemical goods. Redirecting such products to new markets is more challenging due to protectionist barriers of countries safeguarding local markets. Additionally, there is increased demand for such goods on the Russian market.
Experts note that the full implementation of the second scenario is doubtful, primarily due to limited demand for certain goods in the domestic market. Examples include oil and oil products, gas, coal, fertilizers, and wheat. Even with the emergence of corresponding demand, reorientation is possible only to a relatively modest extent. Furthermore, delivery prices to the domestic market remain noticeably lower than export prices.
Source - RBK
