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Russia’s economy suffered a four-year setback in the first full quarter following President Vladimir Putin’s invasion of Ukraine, setting it up for one of the longest downturns in history, albeit less severely than initially anticipated.
According to the Russian statistics office, the economy dropped by 4% from April 2022 through June 2022 compared to the same period last year 2021. Since the invasion of Ukraine in February 2022, this is the first quarterly GDP (gross domestic product) figure to reflect the economic upheaval accurately. From the first quarter, when the economy increased by 3.5 percent, it was a significant reverse.
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However, this is not surprising because the projection was of 4.3% decline. It is worth noting that Russian GDP declined annual 4% last quarter, first drop in over a year.
The central bank had predicted that GDP would decrease 4.3%
According to statistics from June, the Russian economy’s recession appears to have peaked as the situation in several industries is stabilising, according to Sergey Konygin, an economist at Sinara Investment Bank.
The gross domestic product shrank less than anticipated in the second quarter. Analysts at the central bank had predicted that GDP would decrease 4.3% in the second quarter and was on pace to decline 7% in the third. The second half of 2023 is when the central bank expects the economy to begin to revive.
Western sanctions forced large corporations to leave Russia
Western sanctions forced hundreds of large Western corporations to leave the country by cutting off Russia or Russian Federation (RF) from about half of its $600 billion emergency stockpile of foreign currency and gold reserves, placing severe restrictions on business with Russian banks and limiting access to American technology.
However, the Russian economy proved more resilient than some economists had initially anticipated, and the decline in G.D.P. reported on Friday was not as severe as some had expected in part because the country’s coffers were brimming with energy revenue as global prices rose. Nevertheless, imports to Russia dried up and financial transactions were blocked, forcing the country to default on its foreign debt.
Russia’s economy could experience a recession
Russia’s economy could experience a recession worse than that seen during the global financial crisis in 2009, and growth wouldn’t start again until 2025, according to a report by the central bank of Russia.
Russian government is doing everything to take the economy back on track such as going into the contract for Oil supply to nations such as India, these contacts are a win-win situation for both the countries as India will get oil at a cheaper price from its existing cost and from Russia’s perspective it could mean quick cash and will avoid stock pile-up.
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