The Russian economy will contract between 8% and 10% this year due to Western sanctions imposed on Russia for its military campaign in Ukraine, according to macroeconomic forecasts published this Friday (29.04.2022) by the Central Bank, the first since the beginning of the armed conflict on 24 last February. “According to the forecast of the Bank of Russia, GDP will shrink by 8.0% to 10% in 2015. The decline will be driven mainly by factors on the supply side,” said the Russian monetary entity after an ordinary meeting of the board of directors.
“The external environment of the Russian economy remains challenging and significantly limits economic activity,” said the monetary entity, which cut its main interest rate from 17% to 14%, estimating, however, that “the risks to prices and financial stability stopped increasing”. The Central Bank, which had drastically raised its rate to 20% after the first Western sanctions against Russia for the invasion of Ukraine at the end of February, had already cut the interest rate for the first time to 17% on April 8.
The local currency, the ruble, also it had fallen to historical lows against the dollar and the euro, but has recovered. The Central Bank stated that “current growth rates in consumer prices have slowed significantly after peaking in the first half of March.” According to the bank, this is due to the “strengthening of the ruble and the cooling of consumption activity”. The Russian Central Bank recorded year-on-year inflation of 16.5% in March, a level not seen since 2015. The bank forecasts that this year inflation could reach 23%, before slowing down to 2023.
Thus, the BCR believes that in the fourth quarter of 2023, the GDP will increase between 4.0 and 5.5% with respect to the same period of 2022. However, for the year as a whole, the Russian economy will not grow or will remain in negative territory. The monetary regulator pegs Russian GDP for next year at a range of -3.0% and 0%, due to the first quarter base effect of 2022. In 2024, the GDP will increase between 2.5% and 3.5% predicts the BCR.
lgc (afp/efe)