reduce by 8-10%
Officials from the Ministry of Finance and the Ministry of Economic Development are reviewing this year’s GDP contraction. The consensus is clear: a decline is expected. The latest official projections indicate a drop exceeding 10% in GDP, highlighting the seriousness of the downturn.
The projected GDP decline is set to influence budget receipts and law enforcement funding. Authorities have promised targeted support for regional authorities, ensuring that essential programs receive necessary resources. The head of the Accounts Chamber emphasized that the Finance Ministry is already reshaping how costs are distributed, which will require closer oversight and monitoring across regions.
In remarks made later, Kudrin cautioned that no firm forecast could be offered for the government, noting that multiple official analyses have estimated a double-digit recession for the year. He underscored a range of possibilities, from a modest decline to around eight percent, with some experts forecasting somewhat higher figures.
The inevitable fall in GDP
One day earlier, the Central Bank of Russia released its annual report for 2021 to the State Duma. The regulator’s chief, Elvira Nabiullina, explained why a GDP drop is expected to occur in the near term.
Since 2014, the Central Bank has steadily built up and diversified its gold and foreign exchange reserves to form two layers of security. One acts as a cushion during financial crises when demand for the dollar and euro spikes; the other serves in geopolitical tensions, ensuring access to reserve assets. After Western countries froze some reserves in their own currencies, Russia continues to hold ample reserves in gold and yuan, according to the statement.
Officials note that, amid restricted access to the dollar and euro, measures were taken to limit capital movements to protect financial stability. Strengthening the national payment system has also been a priority for the Central Bank of Russia.
Looking ahead to 2022, the regulator indicated a policy focus on shielding the economy and financial system, preserving citizens’ incomes and savings from harsh sanctions, and employing all available tools to minimize risks to financial and price stability.
In Nabiullina’s words, adapting to new conditions is bound to bring a downturn in GDP, but the economy is expected to bounce back through improved production, job creation, and higher domestic investment. Maintaining financial stability and keeping inflation on a predictable path are identified as key prerequisites for the recovery, with the Central Bank pledging to do what’s necessary to secure these outcomes.
World Bank Forecast
The World Bank published its updated outlook on a Sunday. It projects that the Russian economy, stressed by unprecedented sanctions, could shrink by 11.2% in 2022.
The same briefing anticipates Ukraine’s GDP to fall by about 45.1% this year due to ongoing hostilities, underscoring the human and economic toll of the conflict.
In the assessment, the World Bank notes that the ultimate scale of the shrinkage will depend on how long the hostilities endure and how intense they are. Overall, European and Central Asian economies are expected to see a combined GDP decline of roughly 4.1% for the year, according to the fund.
In the wake of Russia’s military actions in Ukraine, Western nations implemented a suite of sanctions. A broad set of Russian stakeholders, including government leaders, business figures, banks, and major enterprises, faced restrictions. Some foreign firms paused operations in Russia as a consequence. President Vladimir Putin has argued that Western strategies to restrain Russia constitute a long-term plan, suggesting that sanctions have delivered a significant blow to the global economy.