Russia's GDP decline could hit 124 pc this year, economy ministry document shows
By Reuters - Apr 27th 2022
Russia expects the economy to contract by 8.8 per cent in 2022 in its base case scenario, or by 12.4 per cent under a more conservative scenario, an economy ministry document showed on Wednesday, further evidence that sanctions pressure is taking its toll.
The conservative forecast is in line with that of former finance minister Alexei Kudrin, who said earlier this month the economy was on track to contract by more than 10 per cent this year in its biggest decline in the gross domestic product since 1994.
The economy ministry expects Russia's economy to grow 1.3 per cent in 2023, 4.6 per cent in 2024 and 2.8 per cent in 2025, the document showed. In the conservative scenario, the economy is seen contracting 1.1 per cent.
The extent of the damage to the economy this year is unclear due to uncertainty regarding possible new sanctions and trade issues. The government is likely to revise forecasts several times this year.
Inflation, which has already soared to 17.62 per cent as of April 15, is seen accelerating to as high as 22.6 per cent this year, the document showed, and remaining well above the central bank's 4 per cent target in 2023.
The central bank hiked rates to 20 per cent from 9.5 per cent in late February in an emergency move that Governor Elvira Nabiullina said helped stabilise the rouble and overcome an inflation spike.
The bank's key rate was lowered to 17 per cent on April 8 in another unscheduled move. Analysts polled by Reuters now expect rates to fall further, by 200 basis points to 15 per cent, at the bank's next rate-setting meeting on Friday.
Capital investment is set to slump by 25.4-31.8 per cent after a growth of 7.7 per cent in 2021, while real disposable incomes, a highly sensitive metric for Russia, especially with rising prices hitting living standards, could drop 9.7 per cent in 2022, according to the ministry's conservative estimate.
The World Bank has forecast Russia's 2022 GDP output will fall by 11.2 per cent due to Western sanctions imposed on Russia's banks, state-owned enterprises and other institutions.
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