MOSCOW, Russia: Financial information released by the Rosstat federal statistics service this week indicated that Russia’s economy shrank 4 percent year-on-year in the second quarter of 2022.
This was the first full quarter measuring Russia’s economy since the start of its February invasion of Ukraine.
Following the invasion, Western countries imposed restrictions on Russia’s energy and financial sectors, including a freeze on Russian bank reserves held abroad, resulting in scores of Western companies departing the Russian market.
Analysts believe that Russia’s economic contraction is a result of weakness in consumer demand and the impact of sanctions.
“June data suggests the contraction in the Russian economy seems to have bottomed out as the situation in some industries is stabilizing,” said Sergey Konygin, an economist at Sinara Investment Bank, as quoted by Reuters.
However, the second-quarter contraction in gross domestic product was less than predicted. A Reuters survey of economists found that the current forecast is for Russia’s GDP to shrink 7 percent year-on-year in April-June. This follows a reported expansion of 3.5 percent in the first quarter.
Further, analysts from Russia’s central bank said the economy would fall 7 percent in the third quarter, and will only begin recovering in the second half of 2023.
In April, Russia’s economy ministry said the country’s gross domestic product could fall by more than 12 percent in 2022. This follows the reported growth of 4.7 percent in 2021.
As Russia has fought back against Western sanctions, the central bank has reduced its predictions of contractions in GDP from 8 percent to 10 percent in April, to an updated 4 percent to 6 percent contraction.
“GDP contraction will reach its bottom in the first half of 2023,” central bank deputy chairman Alexei Zabotkin said on Friday. “The economy will move towards a new long-term equilibrium,” according to Reuters.
