Russian economy will contract by 917 billion dirhams in 2022 – News
Economists noted that the crisis will also push the Russian economy into recession
A man walks past a store advertising the shipment of goods to Russia and other countries along a street in Beijing. Sanctions against Russia will also have a substantial impact on the global economy and financial markets. — AFP
Russia’s economy will shrink by around $250 billion (more than 917 billion dirhams) due to sanctions imposed by Western countries following the military conflict with Ukraine, leading to its decline in its global ranking also among the best economies, according to economists.
Since President Vladimir Putin asked the Russian army to launch an offensive against Ukraine, the United States and many European countries have imposed economic and financial sanctions on Russian companies and frozen the assets of wealthy individuals.
Thousands of people are believed to have died and been injured in the 11-day long war, while around 1.5 million Ukrainians have sought refuge in neighboring countries.
Economists noted that the crisis will also drag the Russian economy into recession.
“One of the immediate effects of the war in Ukraine will be to push Russia back several places in the ranking of the world’s largest economies. As a result, the immediate effect of the war will be to drastically reduce the size of the Russian economy as a share of world GDP. At the end of last year, Russia was the world’s 11th largest economy with a GDP of $1.65 trillion. By the end of this year, we believe it could fall to 14th place with a GDP of $1.4 trillion,” says Neil Shearing, group chief economist at Capital Economics.
He noted that the war is likely to cause policy changes in many areas, including energy, as European nations are likely to accelerate their transition from fossil fuels to renewables to reduce their dependence on with regard to Russia.
“The war, and in particular the response of Western governments, has already caused a major economic and financial crisis in Russia,” he added.
As the West isolates the Russian economy by delinking it from the international banking system known as SWIFT, the ruble has lost more than 30% of its value against the US dollar since the start of the war.
Similarly, the fortunes of Russian billionaires have also shrunk since Feb. 24, when Moscow launched a military attack, dropping an estimated $88 billion (Dh323 billion), according to Bloomberg Billionaires Index.
Among Russian billionaires, the biggest losers are Lukoil Chairman Vagit Alekperov, Norilsk Nickel Chairman Vladimir Potanin, Ural Mining and Metallurgical Co. Chairman Iskandar Makhmudov, Severstal Chairman Alexei Mordashov and founder of the Volga Group, Gennady Timchenko, among others.
Stéphane Monier, chief investment officer, Banque Lombard Odier & Cie SA, said the attack on Ukraine would undermine Russia’s short- and long-term prospects and plunge its economy into recession.
“Western sanctions will severely undermine Russia’s near-term prospects for growth and inflation…As Putin appears willing to sacrifice Russia’s economy for geopolitical gain, the country could become even more strategically dependent on China Monier added.
Kristalina Georgieva, managing director of the International Monetary Fund, said that although the situation remains very fluid and the outlook is subject to extraordinary uncertainty, the economic consequences are already very serious.
“If the conflict escalates, the economic damage would be all the more devastating. Sanctions against Russia will also have a substantial impact on the global economy and financial markets, with significant spillovers to other countries,” Georgieva added.