Panorama econòmic

Economic indicators

On February 24th 2022, Russia initiated a military conflict on the Ukrainian territory, which profoundly upsets the current political context in both countries and will have substantial political and economic ramifications. For the ongoing updates on the developments of Russia-Ukraine conflict please consult the dedicated pages on BBC News.

The latest specific information on economic sanctions against Russia in response to the conflict in Ukraine is available below:
•    What sanctions are being imposed on Russia
•    The list of global sanctions on Russia for the war in Ukraine

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

After a strong recovery from the COVID-19-induced recession, the Russian economy contracted again in 2022 (-3.4%), in the context of the war in Ukraine and the subsequent economic sanctions imposed by Western countries (IMF). The invasion of Ukraine by Russian military on February 24th 2022 prompted exceptionally harsh sanctions, including the freezing of central bank assets, aimed at pushing the Russian economy into a deep and lasting recession. According to IMF forecasts, the Russian economy should contract again in 2023 (-2.3%) before renewing with positive growth in 2024 (1.5%). High inflation negatively impacts private consumption, which is the traditional growth driver (Coface), and the exodus of foreign capital hits investment activity. Increasing economic isolation will weigh on long term growth potential (Focus Economics).

In 2022, the Russian economy was hit by the unprecedented number of sanctions imposed by Western countries. The stockmarket collapsed along with the rouble and both supply and demand dropped. Inflation soared to 13.8% in 2022 (from 6.7% in 2021). However, the Russian central bank reacted promptly, doubling interest rates, and managed to avoid a financial crisis (The Economist). According to IMF forecasts, inflation should decrease to 5% in 2023 and 4% in 2024, owing to softening demand. The Russian government introduced numerous economic policy measures to dampen the effect of sanctions and trade shocks on the domestic economy. Prime minister Mikhail Mishustin has estimated the overall financial impact of government support measures at more than USD 76 billion in 2022. Combined with increased social spending, total fiscal stimulus measures exceeded 6% of 2021 GDP (The Economist). After recording a balanced budget in 2021, Russia posted a budget deficit of -2.3% GDP in 2022, which is expected to persist in 2023 (-2.1% GDP) and 2024 (-1.2% GDP) according to IMF estimates. Public debt decreased to 16.2% GDP (from 17% GDP in 2021), and is expected to slightly increase to 16.9% GDP in 2023 before declining to 16.4% GDP in 2024 (IMF). Compared to other emerging markets, this is a relatively low ratio. In addition, Russia benefits from substantial savings in the National Wealth Fund. Limited restrictions on the sale of hydrocarbons allowed Russia to post a current-account surplus of over USD 220 billion, restraining Russia’s downturn (The Economist). The 2023 budget allocates a third of total spending to defence and security to support Russia’s military campaign in Ukraine (Reuters). Before the start of the war, the government’s key priorities were to manage the fluctuating COVID-19 pandemic evolution, as well as to achieve budgetary balance and stability. In addition, the government was pursuing the de-dollarization of the economy (Euler Hermes). Russia was already facing many challenges: a large state footprint, weak governance and institutions, insufficient infrastructure, low levels of competitiveness, underinvestment, low production capacity, dependence on raw materials, poor economic climate, lack of structural reforms and ageing of the population.
 
Social inequalities remain high, especially between large cities and rural areas. Only 1% of the population owns around 70% of private assets. Despite the emergence of an urban middle class, the poverty rate remains at around 13%. A middle class protest movement calls for an end to corruption and patronage. According to IMF estimates, the unemployment rate increased to 5.8% in 2020 under the effect of the pandemic, but decreased to 4% in 2022. It is forecast to slightly increase to 4.3% in 2023 and 4.4% in 2024 (IMF). The war in Ukraine darkened the outlook, with high inflation reducing the purchasing power.

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