Sanctions will have even greater consequences over time, especially if Europe significantly reduces oil and gas imports.

The Russian economy will fall by 15% this year and by 3% in 2023 due to sanctions from Western countries, the exit of companies from the Russian market , “brain drain” and a collapse in exports.

Thus, Russia’s 15-year economic growth will be lost, Reuters writes, citing the Institute of International Finance (IIF).

Western sanctions following Russia’s invasion of Ukraine have caused “complete disintegration of 30 years of investment,” said Elina Rybakova, deputy chief economist at the IIF.

According to her, if Europe refuses to export Russian energy resources, the Russian economy will suffer even greater losses in the medium term.

While the Russian economy is sharply slowing down and the population’s ability to pay is shrinking, the surge in oil and gas prices – Russia’s main export – has pushed the country’s current account surplus to a record high in recent months.

However, Rybakova said, one should not mistakenly assume that this surplus, as well as the strengthening of the ruble after the initial collapse, means that the Russian economy is holding up better than expected.

Sanctions will have even greater consequences over time, especially if Europe significantly reduces oil and gas imports.

According to the IIF forecast, Russia’s gross fixed capital formation will decline by 25% in 2022, imports by 28%, and exports by 25%.

“Despite the important steps taken since the end of February, we are far from the peak of sanctions. Additional possible measures, for example, related to the financial system and / or key Russian exports (and imports), could lead to dramatic consequences for the Russian economy, as well as the ability to governments to continue the war in Ukraine. However, the costs of such measures can also be significant for countries that impose sanctions,” the IIF notes.

Rybakova, just back from a trip to Kyiv, also said that while much attention was being paid to reconstruction spending, Ukraine was on the brink of a balance of payments crisis as the war hit its economy. “Ukraine’s support is now needed,” she stressed.

(C)UNIAN 2022