Russian economy takes the biggest hit since Cold War

The GDP will plummet by 14%, which is a much greater collapse than Russia’s financial crisis or the pandemic of the late 1990s.

New research shows that Russia’s economy will take its worst hit since the collapse of the Cold War. Prices are expected to soar by 30% and real incomes to plummet by 25%.

It is a sign of the destruction caused by the invasion by Ukraine. Sanctions and boycotts will be on an unprecedented scale that has not been seen in at least a generation.

According to the Centre for Economics and Business Research (CEBR), GDP will plunge by 14 percent. This is a greater drop than what Russia suffered during the Russian financial crisis of the late 1990s or the pandemic.

The collapse in the rouble has lost more than one-quarter its value since the invasion. Moreover, rising commodities prices will put severe pressure on the cost of living.

According to CEBR calculations, the Ukrainian government’s inflation rate for 2023 will be 30 percent. Prices rose more than 4 percent in the first two weeks of March.

Even if wages rise by 10pc per year, real earnings are expected to fall by 18pc in the next 12 months and more than a quarter at the end of 2024.

Russia is a major exporter of food and energy. Basic goods will likely remain in stock, but imports are expected to disappear.

Douglas McWilliams, CEBR, stated that the level of the crisis in living standards is the same as the one suffered by Iranians during the time when Iran was under western sanctions. This led to an inflation rate of 9pc in 2016 compared to almost 40pc last.

He stated that there was “some room” for the Kremlin’s resources to help limit the price rise, but such a move would only be temporary and partial.

McWilliams stated that there was potential for subsidies to increase with a surplus from high oil revenue, but at the cost of market distortions.

“Wages could be raised more, but to keep Russia competitive these would likely have to be matched with a decrease in the value of the rouble. Inflation would be caused by this fall.

“The budget surplus is large, but the potential to alleviate more than half of the squeeze on living standards is limited, and even that could only be sustained for approximately a year. The squeeze on Russian living standards will likely be severe and it will be difficult to offset.

Linking Shareholders and Executives :Share Talk

If anyone reads this article found it useful, helpful? Then please subscribe or follow SHARE TALK on our Twitter page for future updates. Terms of Website Use All information is provided on an as-is basis. Where we allow Bloggers to publish articles on our platform please note these are not our opinions or views and we have no affiliation with the companies mentioned

Weekly Newsletter

Sign up to receive exclusive stock market content in your inbox, once a week.

We don’t spam! Read our privacy policy for more info.