Russian economy shrank 2.1% last year, less than once expected

RUSSIA’S economy contracted 2.1 per cent last year, defying the worst fears of a major recession as surging commodity exports helped offset the impact of US and European sanctions imposed over President Vladimir Putin’s invasion of Ukraine.

The preliminary result was better than the 3 per cent decline officials expected as recently as the early fall and far short of the 10 per cent drop some forecasters saw when the sanctions first hit just over a year ago.

Hardest-hit were wholesale and retail trade, as well as manufacturing and transport, the Federal Statistics Service said on Monday (Feb 20), while mining, agriculture, construction and government spending grew last year.

“It’s a good result,” said Dmitry Polevoy, economist at Locko Bank. “But this is all in the past. What matters is the future and here there are still few reasons for a recovery. In the base case for 2023, we still see a small contraction of 1-2 per cent.”

The central bank projects growth may resume this year. Bloomberg Economics estimates that the economy will lose US$190 billion in gross domestic product by 2026 relative to its pre-war trajectory. BLOOMBERG