According to the Finance Ministry, Russia is experiencing its worst economic crisis in nearly three decades.
Bloomberg reports that Russia’s GDP could shrink as much as 12 percent this year according to internal forecasts.
This would be the largest contraction since 1994 when Russia’s Soviet-era economy was lurching towards capitalism under its first president Boris Yeltsin. It would also endanger around ten years of economic growth.
Russia is being under increased pressure due to a wave of west sanctions, while the EU is readying to intensify its attack on Russia’s revenues by banning oil imports.
Putin’s government has not yet issued a public economic outlook. However, the Finance Ministry’s numbers are more pessimistic that the central bank’s predictions of a contraction of between 8 and 10 percent this year.
According to sources familiar with the estimates, the gross domestic product could shrink by as much as 12 percent this year. This is more than the expected 8% drop predicted by the Economy Ministry. These figures are based on internal discussions and were shared under anonymity. The government has not released a public forecast.
According to the Finance Ministry, the figure would place the economic turmoil on par with the chaos of the 1990s, when Russia’s Soviet economy was attempting to become a capitalist with a contraction that has not been seen since World War II.
Natalia Lavrova from BCS Financial Group, Moscow, stated that the main negatives were the oil embargo and the EU’s decision to give up Russian gas. “All of that will likely expand slowly, with a lot negative carrying over into 2023.”
She forecasts that there will be a contraction of 10.8% by 2022, and an increase of about 5% by 2023, excluding these factors and using only current sanctions.
According to the Bank of Russia, on April 29th, it expected a contraction of between 8%-10% this year. According to the International Monetary Fund, it was 8.5%. A Bloomberg survey of economists showed a 10.3% median decline.
According to one source familiar with the forecasts, if the Finance Ministry’s forecast is accurate, it would erase approximately ten years of economic growth.
The outlook is uncertain as the war continues, and the U.S. (and its allies) discuss additional sanctions on key exports such as oil.
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