Russia estimated that its economy will fall between 8 and 10 percent due to international sanctions after the invasion of Ukraine

Illustrative file photo of ruble bills at a supermarket checkout in Tara, in Russia’s Omsk region Dec 14, 2021. REUTERS/Alexey Malgavko (ALEXEY MALGAVKO/)

“The external environment of the Russian economy remains challenging and significantly limits economic activity,” said the Russian monetary entity after an ordinary meeting of the board of directors, which published macroeconomic forecasts for the first time since the beginning of the armed conflict on February 24.

According to his projections, the Russian GDP will shrink between 8% and 10% in 2022. The decline will be primarily driven by supply-side factors.” The institution directed by Elvira Nabiúlina maintains that in 2023, the The Russian economy will return to growth “gradually amid structural transformation.”

Thus, the Central Bank of Russia (BCR) believes that in the fourth quarter of 2023, GDP will increase between 4.0 and 5.5% compared to the same period in 2022. However, for the year as a whole, the Russian economy will not grow or will remain in negative territory. The monetary regulator fixes the Russian GDP for the next year in a range of -3.0% and 0%, due to the base effect of the first quarter of 2022. In 2024, the GDP will increase between 2.5% and 3.5% predicts the BCR.

FILE IMAGE.  A Russian flag flies at the central bank headquarters in Moscow, Russia.  March 29, 2021. REUTERS/Maxim Shemetov
FILE IMAGE. A Russian flag flies at the central bank headquarters in Moscow, Russia. March 29, 2021. REUTERS/Maxim Shemetov (Maxim Shemetov/)

The board of directors of the Bank of Russia has also decreased in 300 basic points the interest rateup to 14% on the grounds that “price and financial stability risks no longer increase”. “The Recent weekly data indicates a slowdown in current price growth rates due to a strengthening ruble and cooling consumer activity., affirms the BCR. Their future decisions will depend on factors such as the efficiency of import substitution processes and the scale and speed at which imports of finished products, raw materials and components will be recovered.

“The monetary policy of the Bank of Russia will take into account the need for a structural transformation of the economy and will ensure the return of inflation to the target in 2024″, points out, a goal of 4% that for the moment remains far away. The entity calculates that the Annual inflation will be between 18% and 23% this year, before falling to 5% or 7% next year and returning to the 4% target the next.

The estimates coincide with those published by the IMF on April 19, when it estimated that Russia’s GDP would contract by 8.5% this year, and Ukraine’s by 35%. These figures represent respectively 11.3 and 38.5 percentage points less than the January forecasts that gave Russia a growth of 2.8% and Ukraine of 3.5% in 2022.


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