While Ukraine bears the heaviest humanitarian and economic losses from Russia’s brutal attack, the aggressor economy is also suffering – particularly over the long term. War has put Russia in recession.
BOFIT’s just-released Forecast for Russia 2022–2024 sees Russian GDP contracting by 4 % this year. Despite temporary measures to avoid an acute financial crisis at the start of the invasion and a strong rise in export prices resulting in a smaller-than expected contraction of the Russian economy in the first half of 2022, the economic contraction is expected to speed up in the second half of this year. While reduced private consumption and dwindling inventories will hurt economic growth, strong growth in net exports will still support the economy over the coming months. Thus, the volume of imports should contract this year by 25 %, while the volume of exports only falls by 5 %.
Russia’s economic distress is not expected to ease next year as its economy contracts by another 4 %. Next year’s growth prospects will be considerably degraded when the EU’s oil import bans take effect (the crude oil ban begins in December and the petroleum products ban at the beginning of February 2023). The volume of exports is expected to contract by 10 % in 2023. No significant recovery is expected in 2024. War, sanctions and Russia’s political obsession with self-sufficiency imply a significant reduction in Russia’s potential growth rate over the long term.
The Russian economy is expected to contract by 4 % in 2022 and by 4 % in 2023
Sources: Rosstat for 2019–2021, BOFIT for 2022–2024.