AKIPRESS.COM - Russia’s GDP is projected to go down by 11.2 percent in 2022, according to the World Bank’s latest Economic Update for the Europe and Central Asia region.
Uncertainty over the forecasts is unprecedentedly high, conditional on Russia’s military actions in Ukraine and the global response. The severe impacts of sanctions already in place are expected to drive Russia’s GDP down by 11.2 percent in 2022, largely due to a contraction in domestic demand. High uncertainty, depreciation, disruptions to trade and business closures are expected to result in a 17 percent slump in investment.
A decline in employment and real wages, elevated outmigration and rising costs of living will weigh on private consumption, which is expected to fall by 8.5 percent.
SWIFT and FX restrictions will impede cross-border transactions, leading to delays and cancellations. Announced bans and reductions in purchases of Russian oil and gas are expected to lead to a substantial fall in shipments this year, while larger slump in non-energy export volumes is expected.
However, the current account balance is expected to strengthen as the fall in exports will be more than offset by a contraction in imports. High levels of capital outflows are expected from Russia this year.
In 2023 and 2024, GDP growth is expected to rebound only gradually, at 0.6 and 1.3 percent respectively. Overall, consumer price inflation is expected to rise from 9 percent in 2021 to 22 percent in 2022, and to stay well above the central bank target in the projection period. A decline in economic activity and higher expenditure needs are expected to turn the general government surplus into a substantial deficit in 2022.
The adverse impact of the shock on the financial sector makes a major credit crunch likely, while continued pressure on the corporates and banks, combined with eroded buffers, spells a heightened risk of bank failures and systemic crisis in the sector.