Russian economy shrank 2.1% in 2022, much less than expected

The economic system defied fears of a recession and former predictions that it might contract by greater than 12 %.

A newly opened Stars Espresso outlet within the former location of a Starbucks in Moscow, Russia [File: Alexander Zemlianichenko/ Associated Press]

Russia’s economic system contracted by 2.1 % final 12 months, the federal statistics service mentioned on Monday, shrinking lower than anticipated regardless of its invasion of Ukraine final February and sanctions imposed by European nations and america.

Rosstat’s first gross home product (GDP) estimate for 2022 was a marked enchancment on forecasts made quickly after the battle started. In 2021, the economic system noticed a 5.6 % year-on-year rise.

The economic system ministry had at one level predicted a contraction of greater than 12 % final 12 months, exceeding the falls in output seen after the Soviet Union collapsed and through the 1998 monetary disaster.

In April 2022, the World Financial institution predicted a contraction of 11.2 %.

“As a result of its invasion of Ukraine, Russia faces the most important coordinated financial sanctions ever imposed on a rustic,” the World Financial institution mentioned in a assertion.

“Russia’s economic system will likely be hit very onerous, with a deep recession looming in 2022. GDP is predicted to contract by 11.2 %, with little restoration within the ensuing two years,” it added.

Earlier than the battle in Ukraine started, the Russian authorities had anticipated GDP progress of three % in 2022.

Manufacturing industries and wholesale and retail commerce have been among the many sectors that declined in 2022, whereas agriculture, hospitality, building and mining all registered progress.

Public administration and “army safety” gained 4.1 % in 2022, the statistics company mentioned, including to a 3.3 % rise in 2021. President Vladimir Putin in January paid tribute to the defence sector for supporting the economic system.

Elevated army spending is smoothing out a drop within the nation’s industrial manufacturing, analysts say.

Web exports elevated to 12.8 % from 9.3 %, “as a result of costs of exported gas and power merchandise being considerably above imports”.

Russia’s present account surplus hit a file excessive in 2022, as a fall in imports and sturdy oil and gasoline exports stored international cash flowing in, regardless of Western efforts to isolate the Russian economic system over the battle in Ukraine with successive rounds of sanctions.

In January, the excess shrank 58.2 % year-on-year to $8bn, squeezing Russia’s capital buffers at a time when Moscow is ramping up finances spending.

The nation’s central financial institution on Monday estimated the 2022 financial contraction at 2.5 %.

Forecasts for 2023 are diversified. The federal government expects a decline of 0.8 %, whereas the Worldwide Financial Fund believes the economic system may develop by 0.3 % as commodity exports have proved resilient.