Russian economy will contract by 7,8% in 2022


The Russian economy will contract by 7,8 percent in 2022, the Economy Ministry predicted today, as a result of international sanctions imposed on the Russian Federation due to the invasion of Ukraine by Kremlin troops.

The ministry forecasts are better than those put forward by the Russian central bank, which pointed to a range between eight and ten percent for economic contraction in the current year.

According to the ministry's economic forecasts for the next four years, the economy is expected to contract another 0,7 percent by 2023, while the bank expects a stronger decline of 0,7 percent.

These forecasts coincide with the largest contraction of the Russian economy - 7,8% in 2009 - since Vladimir Putin came to power in 2000.

The Russian economy has already shown effects of international sanctions in the first quarter, in which Russia's gross domestic product (GDP) only grew by 1,6%.

Russian economic analysts expect the lowest point in GDP development to occur in the third quarter, with the recovery that is expected to happen thereafter not being felt in people's lives until the second half of 2023. The macroeconomic forecasts for 2022 point to an inflation rate of 17,5%, a decline in capital investments by 19,4%, a drop in real income by 6,8%, and a rise in unemployment to 6,7%.

The Ministry of Economy also expects exports to drop by 14 percent, which in the case of hydrocarbons should be around eight percent. Anticipating a new package of sanctions, Putin called the European Union's possible renunciation of Russian oil and gas "economic suicide."