Lingering COVID risks and high prices pose only mild concerns to Russia and CIS’s solid growth outlook. Russia’s economy has effectively recovered from the pandemic and will hit structural limits of growth in 2022, indicating a minimal slowdown in demand across the year. With the global economy also in good shape, energy prices will average US$ 67/bbl., aiding economies across the region. Russia and CIS governments will sustain elevated fiscal spending, raising social spending and expenditures on infrastructure, healthcare, and education. Currencies should continue to strengthen in 2022, helping moderate price growth, as US sanctions pressure on Russia remains mild.

Risks to Forecast

The most prominent 2022 risk to the Russia and CIS outlook relates to periodic waves of COVID-19 cases amid the very slow vaccine campaigns, which could cause a revival of restrictions in the region, slowing growth in the first half of 2022. A weak global recovery due to problems with new variants would drive energy prices back down toward US$ 50, weakening the ruble, CIS currencies, and raising import prices. An uptick in US-Russian hostilities could incur harsh US sanctions, weighing on the ruble and sentiment, with spillover effects across CIS.

Business Implications

Consistently improving demand will continue to allow for improvements in sales, though pressure on businesses will remain. Effective key account management and engagement with local partners—particularly via digital channels—are essential to winning in the market. Refocusing on strong segmentation strategies by income and geography are also vital for firms in 2022. Price-sensitivity will remain as inflation remains elevated in the first half of the year, demanding quality offerings while controlling rising costs.

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