In the 1990s, the economy of Russia almost collapsed. It has shrunk for seven years in a row.
Russians who lived through it still think of it. President Putin has framed himself as Russia's salvation, delivering a stable economy and restoring national pride.
The war in Ukraine will wipe out 15 years of growth and send the Russian economy back to the dark days after the fall of the Soviet Union.
Russia has lost access to the global financial system because of sanctions by the US and its allies.
Western companies, from McDonald's to Coca-Cola to Shell, are self-sanctioning and pulling out of the country. The ruble has been on a wild ride. Inflation is going up fast.
Russia's economy will shrink dramatically.
The Institute for International Finance thinks that the Russian gross domestic product will plunge by 15% in 2022. 15 years of growth will be wiped out by a decline of 3% in 2023, according to the IIF.
The economy is expected to shrink by 10% this year, according to Goldman. Capital Economics is forecasting a contraction.
Liam Peach, an emerging markets economist at Capital Economics, told Insider that the impact on Russia will come from every sector. Unemployment is expected to increase from 4.1% to 8% by the end of the year.
The move by Western governments to cut certain Russian banks out of Swift will hit non-energy exports hard. The US and the UK have banned the import of Russian oil.
Goldman believes that sanctions and self-sanctioning by western companies will cause imports and exports to fall this year.
Inflation is expected to go up to 20%.
Western governments are worried about high inflation rates. According to economists, Russians will have to deal with inflation of 20% or more by the end of the year.
The ruble's weakness will push up the price of imports, while sanctions and the withdrawal of Western companies will slash the supply of goods and services.
The supply-side shock is going to be horrible, according to Madina Khrustaleva.
Moscow insiders describe panic, frustration, and shame as Russia is cut off from the global economy.
Russian banks have been withdrawing money from the central bank. The drop in borrowing and investment will be caused by punitive interest rates.
Major changes to the economy will likely be caused by the rapid withdrawal of foreign investment. Commodities production will become more important as the government plays a larger role. She said it would be like the 1990s.
Khrustaleva said that in the 1990s they understood that the structural shift would lead to an increase in productivity. It is a huge loss of productivity.
The pain may be alleviated by commodities and a rising ruble.
The only hope for Russia is that the war in Ukraine increases global commodities prices. Europe gets a third of its natural gas from Russia.
Goldman economists think that Russia will have a large trade surplus in 2022, bringing foreign currency into the country and easing the pain for the financial system.
The ruble has risen in recent days as peace talks intensify. Russia could be reintegrated into the world economy if war ends.
Things could get worse. A move by the EU to restrict energy imports could cause a wave of corporate defaults, according to Peach from Capital Economics.
The outlook is very uncertain. Putin is in charge of the Russian economy.
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