Russia is officially in recession

Russia has officially entered recession with its GDP falling 4% in the third quarter, after already falling 4.1% in the previous quarter, according to the first estimate of the official Rosstat agency released on Wednesday.

Russia is paying the price of heavy Western sanctions, which were imposed after the attack on Ukraine on February 24. However, the regime managed to moderate the shock compared to forecasts that had expected a collapse of around 30% of its GDP at the beginning of the conflict. Russia’s central bank ultimately expects a 3.5% contraction in all of 2022, in line with IMF forecasts.

Activity should continue to deteriorate over the next six months. According to Bloomberg forecasts, the GDP may decrease by 8% in the first quarter of 2023, and the decline will continue until the third quarter of the same year. The IMF predicts a further decline of 2.3 percent for the whole of 2023.

According to Elvira Nabiulina, head of the Central Bank of Russia, the Russian economy shows “adaptability“to”a new realityWar with Ukraine. After raising its key interest rate to 20% in the wake of the first sanctions in late February, it lowered it to 7.5% in mid-September and does not plan to change it until the end of the year. “We have to look at the situation soberly and with open eyes, he commented. Things can get worse, we understand that.»

Wholesale and retail trade, as well as shipping and manufacturing slowed, while construction and agriculture showed signs of good health. Budgetary support to the economy and reorientation of exports to countriesfriends» is allowed to limit the damage. Morgan Stanley Bank plansa permanent supply shock and forced structural transformation to a less technological economy, leading to a prolonged recession and reduced potential growth.“.