Russia’s economy will contract less than expected and inflation will not be as high as projected three months ago, economy ministry forecasts showed, suggesting the economy is dealing with sanctions better than initially feared.
The economy is plunging into recession after Moscow sent its armed forces into Ukraine on February 24, triggering sweeping Western curbs on its energy and financial sectors, including a freeze of Russian reserves held abroad, and prompting scores of Western companies to leave.
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Yet nearly six months since Russia started what it calls a “special military operation”, the downturn is proving to be less severe than the economy ministry predicted in mid-May.
The Russian gross domestic product (GDP) will shrink 4.2 percent this year, and real disposable incomes will fall 2.8 percent compared with 7.8 percent and 6.8 percent declines, respectively, seen three months ago.
At one point, the ministry warned the economy was on track to shrink by more than 12 percent, in what would be the most significant drop in economic output since the fall of the Soviet Union and a resulting crisis in the mid-1990s.
The ministry now sees 2022 year-end inflation at 13.4 percent and unemployment of 4.8 percent compared with earlier forecasts of 17.5 percent and 6.7 percent, respectively.
GDP forecasts for 2023 are more pessimistic, though, with a 2.7 percent contraction compared with the previous estimate of 0.7 percent. This is in line with the central bank’s view that the economic downturn will continue for longer than previously thought.
The economy ministry left out forecasts for prices for oil, Russia’s key export, in the August data set and offered no reasons for the revision of its forecasts.
The forecasts are due to be reviewed by the government’s budget committee and then by the government itself.