Russia’s economy contracted 2.1% in 2022

Russia’s economy contracted 2.1 per cent last year, the federal statistics service said on Monday, compared with a 5.6 per cent year-on-year rise in 2021, hurt by the fallout from Moscow’s decision to send tens of thousands of troops into Ukraine last February.

Rosstat's first gross domestic product (GDP) estimate for 2022 was a marked improvement on forecasts made soon after the conflict began. The economy ministry at one point predicted that Russia's economy would shrink more than 12 per cent last year, exceeding the falls in output seen after the Soviet Union collapsed and during the 1998 financial crisis.

Before the conflict in Ukraine began the Russian government had expected GDP growth of 3 per cent in 2022.

Manufacturing industries and wholesale and retail trade were among the sectors that declined in 2022, while agriculture, hospitality, construction and mining all registered growth.

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Public administration and “military security” gained 4.1 per cent in 2022, the statistics agency said, adding to a 3.3 per cent rise in 2021. President Vladimir Putin in January paid tribute to the defence sector for supporting Russia’s economy.

Increased military spending is smoothing out a drop in Russia's industrial production, analysts say.

Net exports increased to 12.8 per cent from 9.3 per cent, “due to the prices of exported fuel and energy products being significantly above imports”.

Russia’s current account surplus hit a record high in 2022 as a fall in imports and robust oil and gas exports kept foreign money flowing in despite Western efforts to isolate the Russian economy over the conflict in Ukraine.

In January the surplus shrank 58.2 per cent year-on-year to $8 billion, squeezing Russia’s capital buffers at a time when Moscow is ramping up budget spending.

Russia’s central bank on Monday estimated the 2022 economic contraction at 2.5 per cent. – Reuters