Inflation above 20%, gas, oil … war in Ukraine will weigh on Russia, IMF warns

Oil and gas exports slump sharply due to Western sanctions, inflation above 20%… The Russian economy will face strong headwinds this year, the IMF warns that a contraction of 8.5% of the gross domestic product (GDP) expected from Russia in 2022.

The IMF is sounding the alarm on the Russian economy because of the expected strong consequences of the war in Ukraine. Inflation expected to exceed 20% by 2022 in Russia and its economy will suffer from a decline in energy exports (oil, gas), so far largely offset by rising energy prices, according to the International Monetary Fund (IMF) in a report. “In Russia, sanctions and unprecedented uncertainty should weigh heavily on investment and exports, as well as imports and private consumption,” the report authors summarize.

The IMF points out that the energy sector, the ‘backbone’ of the Russian economy, is excluded from the sanctions. But “there are signs that Russian energy exports are being shunned in the market.” “Most importantly, Germany and many EU countries have actually started cutting their economies off from Russian energy sources,” the report’s authors continue. The IMF has calculated that about 60-70% of Russia’s current demand for oil and natural gas could disappear in the coming years, “forcing Russia to diversify its exports to other regions”.

The IMF, which held its spring meetings this week, said it expected Russia’s gross domestic product to contract by 8.5%, mainly due to a decline in export volumes combined with a decline in domestic demand. For now, (…)

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