Russia’s real GDP is projected to decline by 10.4% this year after a growth of 4.7% recorded in 2021, according to the latest outlook revealed by the European Commission (EC), the EU’s executive arm.
The country’s export earnings are expected to surge thanks to high prices and strong demand for commodities.
“This will enable the government to support the ruble, vulnerable groups and the economy, limiting the decline in real GDP to 10.4% in 2022,” the report says.
The EC predicts the Russian economy to stabilize as soon as in 2023, as the country is expected to adjust to the new reality. At the same time, GDP growth is projected to remain restrained next year, amounting to 1.5%, since the ongoing import substitution evoked by the departure of foreign businesses will not be effective enough.
“Uncertainty regarding the nature of future economic ties with the rest of the world will continue to hamper investor confidence and seriously limit the growth potential of the economy,” according to the outlook.
The report projects inflation to exceed 20% this year due to supply side bottlenecks and rising import prices. In 2023, inflation will subside to 10% as purchasing power declines and consumption patterns change, the report adds.
The country’s export of goods and services will drop 16.1% this year, according to the outlook, with 2023 exports expected to see a slight growth of 3.9%. Imports are expected to fall by 25.8% in 2022, and will show an increase of 5.4% next year.
The unemployment rate in the country will reportedly increase by 5.9% in 2022, and is predicted to demonstrate further growth by 5.6% next year.
Private investment is predicted to fall by more than 20% in 2022, given the extremely low appetite for new investment in the current environment amid the withdrawal of foreign companies.
A projected small budget deficit of 0.5% of GDP in 2022 is set to widen to 1.5% of GDP in 2023, as easing commodity prices and limited Russian ability to export them curtails revenues.
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