MOSCOW – Russia’s economy shrank 4.0% year-on-year in the second quarter of 2022, the first full quarter of what Russia calls a “special military operation” in Ukraine, preliminary data from the federal statistics service Rosstat showed on Friday.
The economy is plunging into recession after Moscow sent its armed forces into Ukraine on Feb. 24, triggering sweeping Western restrictions on its energy and financial sectors, including a freeze of Russian reserves held abroad, leading scores of Western companies to quit the market.
Rosstat did not provide any further details but analysts said the contraction had been caused by weakness in consumer demand and the aftermath of sanctions.
“June data suggests the contraction in the Russian economy seems to have bottomed out as the situation in some industries is stabilising,” said Sergey Konygin, an economist at Sinara Investment Bank.
The second-quarter contraction in gross domestic product was not as deep as expected. Analysts polled by Reuters had on average forecast GDP would shrink 7% year-on-year in April-June after expanding 3.5% in the first quarter.
The central bank’s analysts had expected GDP to contract 4.3% in the second quarter, saying it was on track to fall 7% in the third quarter. The central bank projects the economy will start recovering in the second half of 2023.
Given the highly volatile political environment, official forecasts for the depth of Russia’s recession vary.
The economy ministry said in April that gross domestic product could fall by more than 12% this year – after growth of 4.7% in 2021 – in what would have been the biggest contraction since the mid-1990s.
But forecasts have softened since then as Russia pushes back against restrictions.
The central bank predicted in April that GDP would shrink 8%-10%, but last month revised that to forecast a 4%-6% contraction.
“GDP contraction will reach its bottom in the first half of 2023,” central bank deputy chairman Alexei Zabotkin said on Friday. “The economy will move towards a new long-term equilibrium.”
(Reporting by Reuters; Editing by Kevin Liffey)