Russia’s economy is expected to shrink in 2022 by 8-10%

May 13, 2022

Bank of Russia identifies main risks for its baseline scenario

According to the regulator, the uncertainty surrounding the Bank of Russia’s baseline scenario remains exceptionally high. According to the Bank of Russia, the scenario is highly dependent on the evolution of geopolitical variables as well as the economy’s ability to adjust to new circumstances.

The regulator listed increased external trade and financial restrictions, a more dramatic fall in the Russian economy’s potential than expected in the baseline scenario, and a rise in inflation expectations as the primary concerns.

Pro-inflationary risks, on the other hand, predominate in the medium term, “although their influence has lessened compared to the end of February,” according to the Bank of Russia. The regulator listed increased external trade and financial restrictions, a more dramatic fall in the Russian economy’s potential than expected in the baseline scenario, and a rise in inflation expectations as the primary concerns.

The volatility of the ruble exchange rate will continue to have a substantial impact on inflation and inflationary expectations.

According to the regulator, Russia’s economy in 2022 will shrink by 8-10%, in 2023 – within 0-3%. The Bank of Russia expects the economy to return to growth in 2024. Inflation in Russia in 2022 will grow to 18-23%. The rate will decline to 5-7% in 2023 and return to 4% in 2024.

Source: TASS – Russian News Agency
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