Russia risks bigger sanctions hit, internal report warns
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RUSSIA may face a longer and deeper recession as the impact of US and European sanctions spreads, handicapping sectors that the country has relied on for years to power its economy, according to an internal report prepared for the government.
The document, the result of months of work by officials and experts trying to assess the true impact of Russia’s economic isolation due to President Vladimir Putin’s invasion of Ukraine, paints a far more dire picture than officials usually do in their upbeat public pronouncements. Bloomberg viewed a copy of the report, drafted for a closed-door meeting of top officials on Aug 30. Sources confirmed its authenticity.
Two of the 3 scenarios in the report show the contraction accelerating next year, with the economy returning to the pre-war level only at the end of the decade or later. In the “inertial” scenario, the economy bottoms out next year at 8.3 per cent below the 2021 level; the “stress” scenario puts the low in 2024 at 11.9 per cent under last year’s level.
All the scenarios see the pressure of sanctions intensifying, with more countries likely to join them. Europe’s sharp turn away from Russian oil and gas may also hit the Kremlin’s ability to supply its own market, the report said.
Beyond the restrictions themselves, which cover about a quarter of imports and exports, the report details how Russia now faces a “blockade” that “has affected practically all forms of transport,” further cutting off the country’s economy. Technological and financial curbs add to the pressure. The report estimates as many as 200,000 IT specialists may leave the country by 2025, the first official forecast of the widening brain drain.
Publicly, officials say the hit from sanctions has been less than feared, with the contraction possibly less than 3 per cent this year and even less in 2023. Outside economists have also adjusted the outlooks for this year, backing off initial forecasts of a deep recession as the economy has held up better than expected.
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The document calls for a raft of measures to support the economy and further ease the impact of the restrictions in order to get the economy recovering to pre-war levels in 2024 and growing steadily after that. But the steps include many of the same measures to stimulate investment that the government has touted over the last decade, when growth largely stagnated even without sanctions.
The government press service referred a query about the report to the Economy Ministry, which didn’t immediately respond to a request for comment. BLOOMBERG
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