Russia’s economic growth slumps amid Ukraine war, experts say worse to come

Russia on Wednesday released its first economic forecast since the President Vladimir Putin ordered troops into Ukraine, and projected, expectedly, a lower economic growth rate than the previous year.

According to national statistics agency Rosstat, which released the report, the Russian economy was expected to grow at 3.5% in the first quarter of 2022, a notable dip from the 5% economic growth rate reported in the last quarter of 2021.

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While Rosstat said that the projected growth would be driven by passenger transportation and the extraction of minerals, it did not shed any light on the economic impact of Western sanctions, which have grown in volume and intensity since the beginning of the Russian invasion of Ukraine on February 24.

Economists, however, are convinced that the Russian economy is yet to bear the full brunt of sanctions: with restrictions on economic activity since the beginning of the invasion, Moscow has relied extensively on imports of manufacturing equipment, something that experts believe will plunge the Russian economy into a deep recession.

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“This will almost certainly be followed by a steep fall in output in the second quarter as the effects of Western sanctions bite hard,” independent macroeconomic research consultancy Capital Economics said in a note, commenting on Rosstat’s projections for the first quarter of 2022.

“For 2022 as a whole, we’ve pencilled in a 12 percent contraction in Russia’s economy, which would be the steepest downturn since the 1990s,” the consultancy firm added.

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The European Bank for Reconstruction and Development (EBRD) has also predicted dire consequences for the Russian economy in the months to come: according to the London-based bank, the Russian economy is expected to contract by 10% this year, and is further expected to slump to post zero growth next year.

However, Putin has thus far maintained that Russia has managed the weather the economic consequences of Western sanctions, and it remains to be seen what economic cost Russia ultimately ends up paying for the war in Ukraine.