The Institute of International Finance (IIF) said Russia’s economy will shrink 15% this year and 3% in 2023 as the impact of Western sanctions, trade exit and a collapse in exports erode 15 years of economic gains.
In a report on the Russian economy following Moscow’s invasion of Ukraine on February 24, the IIF said it did not expect a ceasefire in the war and would expand and tighten sanctions in the coming months.
Elina Ribakova, IIF deputy chief economist, told reporters at a news conference on Wednesday that the restrictive measures implemented by the West after the invasion triggered a “complete disintegration of 30 years of investment”.
“How many numbers are you going to put in to break the 15-year-old value chains?” The Minister added that if Europe moves away from Russia’s energy exports, the economy will be affected even more in the medium term.
As the Russian economy slows sharply and Russian purchasing power declines, the rise in oil and gas prices, the main items on the national export agenda, has pushed the country’s current account surplus to record levels in recent months.
Ribakova said the surplus, as well as the ruble’s recovery after the initial decline, should not be confused with thinking that the Russian economy is currently doing better than expected.
He said that as imports collapsed, Russian banks were flooded with foreign exchange reserves, but Russian businesses and consumers had nothing to spend.
Instead, he stressed that the impact of the sanctions will be stronger over time, especially if Europe significantly reduces its oil and gas imports, but that it will take months, if not years.
“Additional measures, such as those related to the financial system and/or major Russian exports (and imports), will be possible and could have dramatic consequences for the Russian economy, as well as the government’s ability to continue the war effort in Ukraine . . , the costs of such actions for countries that impose sanctions. It could also be important.”
source: Noticias
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