July 5, 2022

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Russia Says Economy Grew 3.5% in First Quarter

Russia's state statistics agency said on Wednesday it expected economic growth to stand at 3.5 percent in

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Russia’s state statistics agency said on Wednesday it expected economic growth to stand at 3.5 percent in the first quarter of this year. Online News

The figures released by Rosstat were the first estimate of Russian economic growth since President Vladimir Putin sent troops to Ukraine in late February and the West slapped several rounds of unprecedented sanctions on the country.

The growth is expected to be driven by passenger transport and the extraction of mineral resources, according to Rosstat.

By comparison, Russia’s economy expanded by five percent in the fourth quarter of 2021.

Economists believe that the worst economic impact of the sanctions is still to come and expect Russia, which has relied heavily on imports of manufacturing equipment and consumer goods, to plunge into a deep recession.

“This will almost certainly be followed by a steep fall in output in the second quarter as the effects of Western sanctions bite hard,” Capital Economics said in a note.

Russian steel works in Online News & World News
Magnitogorsk Iron and Steel Works Author: Pesotsky Creative Commons

“For 2022 as a whole, we’ve pencilled in a 12 percent contraction in Russia’s economy, which would be the steepest downturn since the 1990s.”

In late April, the Bank of Russia estimated that the country’s annual economic output would fall between eight and 10 percent this year and by up to three percent next year.

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The central bank said it expected the economy to grow between 2.5 and 3.5 percent in 2024.

“The external environment for the Russian economy remains challenging and significantly limits economic activity,” the central bank said at the time.

The European Bank for Reconstruction and Development (EBRD) has said it expected Russia’s economy to contract 10 percent this year and post zero growth next year.

Before Putin sent troops to Ukraine on February 24, the London-based EBRD had predicted that the Russian economy would expand by three percent.

Russia will take “many years” to rebuild its economy if Western sanctions remain in place for a long time, the head of the audit chamber and former finance minister Alexei Kudrin said in April.

Putin has repeatedly claimed that Russia’s economy has managed to weather the barrage of sanctions.

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