Russia under sanctions
The Russian economy has been under restrictions since 2014 and over the years it has structurally adapted to them. However, the level of sanctions pressure after February 22, 2022 is unprecedented, private companies have also joined the restrictions.
According to the Yale School of Management, since the beginning of the conflict in Ukraine, 799 large foreign companies have left Russia, 312 have reduced operations, investments, frozen projects, and only 244 continue their activities.
The restrictions imposed will be similar in scale to the structural crisis after the collapse of the USSR. Following our estimates, the decline in Russia's GDP in 2022 will be 9.5% — this is the second deepest recession since 1991, and inflation will exceed 20%.
The scale and variety of the imposed sanctions form a significant uncertainty of economic instability in Russia and other countries:
- cross-border flows of goods and payments are essentially hindered. This undermines supply chains and leads to a decrease in economic activity, as well as puts pressure on the labor market and inflation;
- the ability of the Central Bank and the Government to respond to an economic shock and a space for economic policy in the future is limited;
- investment activity and long-term economic growth potential are suppressed.
We tried to consider the main effects of sanctions on the Russian economy, possiblec channels of instability spreading to the economs of other countires, primarily Kazakhstan.
- Russia is better prepared for sanctions today;
- Pressure on the ruble is low due to the limited demand;
- The ruble exchange rate will be determined by fiscal needs;
- The scale of the crisis in Russia will be determined by the depth of export restrictions;
- The world will face the price shocks on the energy and food markets;
- Central Asian countries will suffer from disruption of supply chains and a decrease in transfers from the Russian Federation;
- Significant risks are emerging in the food market for Kazakhstan.
Read more in the paper
Alexander DauranovExecutive Director
15 November 23
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