Russian Economy in Freefall as It Enters Recession

Russia's economy shrank 4% year-on-year in the third quarter of 2022, data from the Rosstat federal statistics service showed Wednesday, as the consequences of the country's military actions in Ukraine continued to weigh on the economy.

That officially put the Russia economy in a recession, as it comes on top of a 4.1% contraction of Russia gross domestic product (GDP) in the second quarter, year-on-year. Western sanctions apparently are beginning to take a toll on Russia's finances and wider economy.

Since the sanctions were imposed, Russia has suffered a tremendous drop in trade and an exodus of hundreds of thousands of skilled workers, the UK's Express reports.

"We think the downturn may yet deepen in Q4 and Q1, as the recent mobilization of reservists and the EU oil embargo take their toll," says Liam Perch, senior markets analyst at Capital Economics.

Russia's outlook through at least mid-2023, Perch says, "remains bleak."

Russia's oil exports to Asian and the EU have been sharply reduced by sanctions, according to Express. However, the profits Russia has been able to gain from its oil and gas exports are widely seen as funding President Vladimir Putin's war on Ukraine. As well, Russia has been able to stabilize its banking industry, economists say.

Russia deployed tens of thousands of troops to Ukraine on Feb. 24 in what Moscow calls a "special military operation." Before the full effects of sanctions had been felt, the Russian economy grew 3.5% in annual terms in the first quarter.

Russia's economy ministry sees GDP falling by 2.9% this year, while the central bank expects a 3-3.5% drop before a return to growth in the second half of 2023.