The Russia’s Gross Domestic Product of Russia will contract by 3% in 2023, compared to 2.5% last year, mainly due to the embargo on russian oil and to price limit set by the West in punishment for its invasion of Ukraine, according to the Vienna Institute for International Economic Studies (WIIW).
In addition to oil sanctions, the partial mobilization of recruits to participate in the war and the decline in gas exports to Europe will also influence this drop in the economypoints out that institution in its winter forecast for central, eastern and southeastern Europe.
“The EU oil embargo and capping Russian crude prices have forced Russia to sell its oil at huge discounts”, says the WIIW in a statement, in which it recalls that in the first four weeks of application of the sanctions, the price of Russian Urals crude has plunged to around $47 a barrel.
In contrast, a barrel of Brent, a benchmark in Europe, was trading at around 86 dollars at the end of last week.
That drop in revenue, however, will not have an immediate impact on the ability of Russian President Vladimir Putin to continue financing the aggression against Ukraine, since, according to the WIIW, that mismatch will be covered by increasing the budget deficit.
The experts of the Institute indicate that higher defense spending is limiting the recession.
However, he points out that there is data that, beyond the evolution of GDP, guides the evolution of the Russian economy, such as the drop of up to 10% that retail sales have suffered since the attack on Ukraine began eleven months ago. .
In addition, the ban on exports of high-tech products is having a huge impact on Russia’s “already weak long-term growth prospects,” the wiiw report notes.
(With information from EFE)
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