As President Vladimir Putin’s war in Ukraine enters its second month, the dire economic costs are becoming clear after the invasion spurred a multitude of sanctions and prompted companies to pull out of the country.
Gross domestic product will shrink 9.6% in 2022 and contract 1.5% in 2023, according to Bloomberg’s poll of 24 analysts conducted March 18-23. Before the attack on Ukraine in late February, the economy was on track to expand for a second year.
In another stark revision of outlook, inflation is now forecast to average 20% this year, which would be the fastest in about two decades. The central bank will have to maintain its key interest rate at 20% at least until the end of the second quarter, the survey showed.
The invasion of Ukraine spurred a collapse of the ruble and threw global supply chains and commodities prices into chaos, while also sparking the mass departure of companies from the country. To punish Russia, foreign governments slapped sanctions on trade and finance, froze the reserves of its central bank and cut many of its banks from the SWIFT global messaging system.
Russia has sought to insulate its economy and markets with capital controls, a doubling of interest rates and other emergency measures, all of which will hurt growth.
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