What are the main impacts of sanctions on Russian economy?
What are the aims of sanctions?
Eight sanctions packages were adopted by the council following Russia’s unprovoked and justified invasion of Ukraine in February 2022, but food,agriculture, health, and pharmaceuticals are excluded. The sanctions aim at weakening Russia’s ability to finance the war and specifically target the political, military and economic elite responsible for the invasion.
Estimates from diverse sources show that the restrictive measures are working as expected, and the results are visible through economic indicators.
The Russian economy is shrinking
According to independent analysis by the World Bank, International Monetary Fund and The Organisation for Economic Cooperation and Development (OECD), 2022 will be a bad year for the Russian economy. Gross Domestic Product (GDP) is expected to drop by at least 5.5% in the best scenario to almost 9% in the worst scenario.
Russia’s GDP growth (year-on-year)
The chart shows that, in 2022, Russian GDP will drop by 5.5% according to the OECD, by 6% according to the IMF and by 8.9% according to the World Bank.
Declining trade, soaring inflation
The import and export of specific items are the focus of the restricting measures. The list of prohibited goods is intended to have the greatest detrimental effect on the Russian economy while having the fewest negative effects on enterprises and persons in the EU.
The figures show that those restrictive measures are working. Both the World Bank and the International Monetary Fund estimate that in 2022 Russian trade in goods and services will decline significantly.
Russia’s trade (year-on-year)
Estimations show that Russia’s inflation rate will increase sharply in 2022, reaching up to 22 % (depending on the source).
Russia’s inflation rate
Effects on the Russian capital market
Russian businesses have been significantly impacted by both the war and the sanctions. The main index of the Moscow Exchange has fallen by more than one third since February.