On February 24th 2022, Russia initiated a military conflict on the Ukrainian territory, which profoundly upsets the current political context in both countries and will have substantial political and economic ramifications. For the ongoing updates on the developments of Russia-Ukraine conflict please consult the dedicated pages on BBC News.
The latest specific information on economic sanctions against Russia in response to the conflict in Ukraine is available below:
• What sanctions are being imposed on Russia
• The list of global sanctions on Russia for the war in Ukraine
For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.
After a strong recovery from the COVID-19-induced recession, the Russian economy contracted again in 2022 (-3.4%), in the context of the war in Ukraine and the subsequent economic sanctions imposed by Western countries (IMF). The invasion of Ukraine by Russian military on February 24th 2022 prompted exceptionally harsh sanctions, including the freezing of central bank assets, aimed at pushing the Russian economy into a deep and lasting recession. According to IMF forecasts, the Russian economy should contract again in 2023 (-2.3%) before renewing with positive growth in 2024 (1.5%). High inflation negatively impacts private consumption, which is the traditional growth driver (Coface), and the exodus of foreign capital hits investment activity. Increasing economic isolation will weigh on long term growth potential (Focus Economics).
In 2022, the Russian economy was hit by the unprecedented number of sanctions imposed by Western countries. The stockmarket collapsed along with the rouble and both supply and demand dropped. Inflation soared to 13.8% in 2022 (from 6.7% in 2021). However, the Russian central bank reacted promptly, doubling interest rates, and managed to avoid a financial crisis (The Economist). According to IMF forecasts, inflation should decrease to 5% in 2023 and 4% in 2024, owing to softening demand. The Russian government introduced numerous economic policy measures to dampen the effect of sanctions and trade shocks on the domestic economy. Prime minister Mikhail Mishustin has estimated the overall financial impact of government support measures at more than USD 76 billion in 2022. Combined with increased social spending, total fiscal stimulus measures exceeded 6% of 2021 GDP (The Economist). After recording a balanced budget in 2021, Russia posted a budget deficit of -2.3% GDP in 2022, which is expected to persist in 2023 (-2.1% GDP) and 2024 (-1.2% GDP) according to IMF estimates. Public debt decreased to 16.2% GDP (from 17% GDP in 2021), and is expected to slightly increase to 16.9% GDP in 2023 before declining to 16.4% GDP in 2024 (IMF). Compared to other emerging markets, this is a relatively low ratio. In addition, Russia benefits from substantial savings in the National Wealth Fund. Limited restrictions on the sale of hydrocarbons allowed Russia to post a current-account surplus of over USD 220 billion, restraining Russia’s downturn (The Economist). The 2023 budget allocates a third of total spending to defence and security to support Russia’s military campaign in Ukraine (Reuters). Before the start of the war, the government’s key priorities were to manage the fluctuating COVID-19 pandemic evolution, as well as to achieve budgetary balance and stability. In addition, the government was pursuing the de-dollarization of the economy (Euler Hermes). Russia was already facing many challenges: a large state footprint, weak governance and institutions, insufficient infrastructure, low levels of competitiveness, underinvestment, low production capacity, dependence on raw materials, poor economic climate, lack of structural reforms and ageing of the population.
Social inequalities remain high, especially between large cities and rural areas. Only 1% of the population owns around 70% of private assets. Despite the emergence of an urban middle class, the poverty rate remains at around 13%. A middle class protest movement calls for an end to corruption and patronage. According to IMF estimates, the unemployment rate increased to 5.8% in 2020 under the effect of the pandemic, but decreased to 4% in 2022. It is forecast to slightly increase to 4.3% in 2023 and 4.4% in 2024 (IMF). The war in Ukraine darkened the outlook, with high inflation reducing the purchasing power.
|Main Indicators||2020||2021||2022 (E)||2023 (E)||2024 (E)|
|GDP (billions USD)||1,488.12||1,836.63||2,215.29||2,062.65||2,118.25|
|GDP (Constant Prices, Annual % Change)||-2.7||5.6||-2.1||0.7||1.3|
|GDP per Capita (USD)||10,181||12,618||15,444||14,404||14,821|
|General Government Balance (in % of GDP)||-4.4||0.5||-2.0||-5.9||-2.6|
|General Government Gross Debt (in % of GDP)||19.2||16.5||19.6||24.9||25.3|
|Inflation Rate (%)||3.4||6.7||13.8||7.0||4.6|
|Unemployment Rate (% of the Labour Force)||5.8||4.8||3.9||3.6||4.3|
|Current Account (billions USD)||35.37||122.27||227.40||75.11||67.12|
|Current Account (in % of GDP)||2.4||6.7||10.3||3.6||3.2|
Source: IMF – World Economic Outlook Database, Latest data available.
Note : (E) Estimated data
Russia has significant natural resources. It is the world's second largest producer of natural gas and the third largest producer of petroleum, but also one of the main producers and exporters of diamonds, nickel and platinum. In addition to the Russia-China and Russia-Turkey gas pipelines, a new gas pipeline to Germany was scheduled to start operating in 2022, but the launch was postponed due to Russia’s invasion of Ukraine. Despite its large area, Russia has relatively little arable land due to unfavourable climatic conditions. The country nevertheless owns 10% of the world's agricultural land and is one of the main exporters of cereals. The northern regions of the country focus mainly on livestock, while the southern regions and western Siberia produce cereals. Agriculture contributes 3.8% of the national GDP and employs around 6% of the total working population.
Industry accounts for 33.2% of Russia's GDP and employs 27% of the workforce. The country inherited most of the industrial bases of the Soviet Union. The most developed sectors are chemistry, metallurgy, mechanics, construction and defence. In response to economic sanctions from the United States and the EU, the government has implemented an import substitution policy that could boost domestic production.
The service sector employs 67% of the population and generates 52.9% of the GDP. Since the 1998 financial crisis, the banking sector has not undergone complete restructuring. Given the size of the country, the transport, communications and trade sectors are particularly important. Tourism is also becoming an important source of income.
After recovering from the COVID-19 pandemic in 2021, Russia’s economy was hit by the sanctions imposed by Western countries and the divestments that occurred following the invasion of Ukraine.
|Breakdown of Economic Activity By Sector||Agriculture||Industry||Services|
|Employment By Sector (in % of Total Employment)||5.8||26.8||67.4|
|Value Added (in % of GDP)||3.8||33.2||52.9|
|Value Added (Annual % Change)||-1.3||4.9||4.8|
Source: World Bank, Latest data available.
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The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.
The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.
The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).
The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.
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Latest Update: September 2023