As quick-fire, the Russian economy has been pummeled by Western unprecedented sanctions, unwilling to face a nuclear opponent on the battlefield. Sanctions imposed include freezing of Russian central bank assets, targeting of wealthy Russian individuals and some state-owned banks, partial access restriction to the international payments system SWIFT and a stop from Germany to its Russian gas pipeline project. Sanctions’ costs to Russia are partly cushioned by higher prices for gas and oil exports and the avoidance of restrictions through trade conducted with third countries, but the net economic impact on the Russian economy will be negative. We have estimated these spillover effects using our Global Econometric Model (NiGEM). We expect the war to contribute to a fall in GDP in Russia (relative to base) of 1.5 per cent in 2022 and 2.6 per cent by the end of 2023. Russian inflation is likely to soar above 20 per cent this year due to higher import prices following the fall in the rouble and due to higher inflation expectations, resulting in lower confidence, weaker real incomes, and disrupted trade.Overall, we expect actions against Russia could reduce foreign direct investment, leading to outflows of capital, and reducing its long-term potential growth rate.
Keyword:Russia, Ukraine, Economy, inflation, foreign, trade, oil, exports, GDP, capital
Aashish Tank