Russia’s economy will contract by 15% this year and 3% in 2023 as the impact of Western sanctions, a business exodus and a collapse in exports wipe out 15 years of economic gains, the Institute of International Finance (IIF) said. ).
In a report on the Russian economy after Moscow’s February 24 invasion of Ukraine, IIF said it did not expect a ceasefire in the war and that sanctions were likely to be expanded and tightened in the coming months.
The restrictive measures imposed by the West after the invasion triggered the “total disintegration of 30 years of investment”, Elina Ribakova, deputy chief economist at the IIF, told reporters at a news conference on Wednesday.
“What number are you going to put on destroying 15 years of value chains?” she said, adding that if Europe turns away from Russian energy exports, the economy will be hit even harder in the medium term.
As Russia’s economy slows sharply and the purchasing power of Russians dwindles, a rise in the prices of oil and gas – main products on the national export agenda – has pushed the country’s current account surplus to record levels in recent months.
Ribakova said the surplus, as well as the ruble’s recovery after an initial tumble, should not be confused with thinking that Russia’s economy is currently doing better than expected.
Russian banks are flush with foreign exchange reserves as imports collapse, she said, but Russian businesses and consumers have nothing to spend on.
Instead, the impact of sanctions will be stronger over time, especially if Europe cuts oil and gas imports significantly, though she stressed that would take months, if not years.
“Additional measures such as those related to the financial system and/or major Russian exports (and imports) would be possible and could lead to dramatic consequences for the Russian economy as well as the government’s ability to continue its war effort in Russia. Ukraine. However, the costs of such actions can also be significant for countries imposing the sanctions.”
Source: CNN Brasil
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