Market panic in Russia has passed, but recession is looming

Russia’s GDP is unlikely to return to pre-crisis levels until the early 2030s, according to our modelling. We expect Russia’s economy to contract by almost 11% in 2022 and a further 3.3% in 2023, assuming that the war on Ukraine does not continue beyond 2023. Our forecasts also assume that the EU reduces imports of Russian gas this year but does not embargo Russian oil imports.

What you will learn:

• Russia’s initial reaction to sanctions – including an unprecedented 1050bp rate hike and capital controls – have stabilised the FX market and prevented bank runs.
• But financial conditions are fragile and sanctions may yet push the government or corporate borrowers into default.
• The severing of commercial ties with the West and the departure of western businesses will lead to a spike in unemployment, which we see peaking at 9.7% in Q4 2022.