Russia’s GDP – Third Quarter 2022

According to the preliminary reading, GDP declined at a more moderate rate of 4.0% year-on-year in the third quarter, compared to the 4.1% contraction recorded in the second quarter. As a result, the economy entered a recession caused by the economic fallout from the Russian invasion of Ukraine.

Sequencing data and a full breakdown of the components are not yet available and will be published in the coming months. Commenting on the performance of the economy in the third quarter, analysts at Goldman Sachs said:

Using a simple seasonal adjustment filter, [the headline reading] Indicates slightly negative sequential growth. We believe there has been sequential growth in domestic demand, driven in part by inventory build-up. Instead, it is likely that the contribution to growth from net exports has declined, despite some recovery in export volumes, due to higher imports.”

Economic conditions remained calm until the last quarter of the year. The increasing cost of the war in Ukraine in light of the partial mobilization order and ongoing international sanctions will likely continue to hurt the economy in the fourth quarter and next year. It is worth noting that the decline in global energy prices and the significant decline in natural gas shipments to Europe bode ill for the external sector.

Analysts at Swedbank highlighted the resilience of the economy so far this year, though they took a gloomy tone regarding the outlook:

Russia’s economy appears to be taking the blow from international sanctions, as it has successfully avoided the collapse of its financial system, and the economic downturn so far has been much less than many analysts predicted in the spring. However, this is only the tip of the iceberg. The Russian economy is likely to experience a longer recession and potentially lower GDP growth after that, as more painful sanctions will soon take effect.”

FocusEconomics panelists expect gross domestic product to contract by 3.5% in 2023, which is 0.2 percentage points less than last month’s forecast. In 2024, the economy is expected to expand by 1.3%.

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