President Vladimir Putin’s invasion of Ukraine set the Russian economy back four years in the first full quarter after the attack, putting it on the road to one of the longest crises in history, even if less violent than initially announced – according to the analysis of the Bloomberg agency.
The Russian economy, which was gaining momentum in early 2022, began to contract in the second quarter. “In the following year, it will lose another 2 percent, because the European energy embargo will affect exports from Russia, “points out Alexander Isakov, a Russian economist, quoted by Bloomberg.
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He adds that the shock caused by international sanctions disrupted trade and paralyzed various industries (e.g. car production) while consumer spending has been halted.
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The Bank of Russia is doing everything possible to mitigate the strength of the shocks. Also fiscal stimulus and multiple monetary easing in recent months also started to act, weakening the impact of international sanctions.
Bank of Russia aims for 2025
On Friday, the central bank released its draft policy for the next three years, predicting that the economy will need until 2025 to return to a potential growth rate of 1.5-2.5%.
The report also includes the so-called a risk scenario in which global economic conditions continue to deteriorate and Russian exports are subject to additional sanctions. If this happens, Russia’s economic collapse next year may be deeper than during the global financial crisis in 2009, and economic growth will not resume until 2025.
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Bloomberg notes that the dispute over energy supplies to Europe is creating new threats to the Russian economy. Monthly declines in oil production will start in August. The International Energy Agency predicts that oil production in Russia will drop by about 20 percent. until the beginning of next year.