The Russian economy is visibly affected by the international sanctions against Russia and the massive boycott of the country by Western companies. New figures from Russia’s Ministry of Economy indicate an economic contraction of 3 percent in April, after gross domestic product (GDP) grew by 1.3 percent in March.
Read everything about the war between Ukraine and Russia in this file.
Massive panic buying by Russians in the weeks following the invasion of Ukraine initially obscured the economic blow of Western punitive measures. But then inflation started to pick up extra fast. This made life for Russians suddenly much more expensive. Russian households have therefore started to buy less and have started to save more in uncertain times.
The store sales in Russia fell nearly 10 percent year-on-year in April, data from the Federal Statistics Office in Moscow show. The blow to the industry and the freight transport also turned out to be worse than widely anticipated by economists. The production in factories was almost 2 percent lower than a year earlier.
However, the situation on the Russian labor market quite stable and the Surprisingly, unemployment even fell slightly to 4 percent of the labor force. This is despite dozens of foreign companies withdrawing from Russia in the aftermath of the invasion. Probably a factor is that most of those companies have chosen to pay their Russian employees normal salary for the time being.
The prospects for the Russian economy do not look good, it was previously announced. Last month, the Russian central bank said it expected a contraction of between 8 and 10 percent for the whole of this year. Inflation is expected to be somewhere between 18 and 23 percent. The International Monetary Fund (IMF) previously forecast that the Russian economy will shrink by 8.5 percent this year.
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