Russia’s Economy Facing Worst Contraction Since 1994

According to an internal forecast by the Finance Ministry, Russia is facing the deepest economic contraction in nearly three decades.

According to people familiar with the estimates who spoke on condition of anonymity to discuss internal deliberations, the economy is likely to shrink as much as 12% this year. Since the invasion of Ukraine, the government has not released a public forecast.

The Finance Ministry said that the report was incorrect.

The economic pain of a 12% contraction would be comparable to the turmoil of the early 1990s, when Russia lurched toward capitalism with a contraction not seen since wartime.

The main negatives are the oil embargo, the EU giving up Russian gas, and more departures among foreign companies.

She forecasts a contraction of 10.8% in 2022, and 5% in the following year.

The EU dropped their plan to stop the tanker movement of Russian oil.

The Bank of Russia expects a contraction this year. A survey of economists found a median decline of 10.3%, while the International Monetary Fund forecast one of 8.5%.

A decade of economic growth would be wiped out if the Finance Ministry's forecast is accurate.

As the war continues and the U.S. and its allies discuss further sanctions, the outlook is very uncertain.

The Economy Ministry's press service didn't respond to a request for comment.

With assistance from Benjamin Harvey.