Russia’s economy has entered a recession as gross domestic product fell by four percent in the third quarter, according to the first estimates released Wednesday by the national statistics agency, Rosstat.
The decline in gross domestic product follows a similar four percent contraction in the second quarter, as Western sanctions ravaged the Russian economy in the wake of Moscow’s attack on Ukraine.
The four percent drop in economic output between July and September was less than the 4.5 percent contraction that analysts had expected.
The contraction was driven by a 22.6 percent drop in wholesale trade and a 9.1 percent drop in retail trade.
On the bright side, construction grew by 6.7 percent and agriculture by 6.2 percent.
A recession is generally defined as two consecutive quarters of economic contraction. Russia last experienced a technical recession in late 2020 and early 2021 as the world was going through the coronavirus pandemic.
The Russian economy did well in early 2022 with a 3.5 percent increase in GDP, but the start of the offensive against Ukraine led to a wave of sanctions from the West.
Restrictions on exports and imports, staff shortages, and problems with the supply of spare parts put severe stress on the Russian economy.
On November 8th, the central bank predicted that the gross domestic product will contract by 3.5 percent this year.
The International Monetary Fund and the World Bank respectively estimate a decline in Russia’s GDP at 3.4 percent and 4.5 percent.
Despite the economic downturn, Russia’s unemployment rate was 3.9% in September, according to Rosstat.
In October, Russia’s central bank kept its main interest rate at 7.5 percent. This was the first time since the beginning of the military offensive in Ukraine that the main rate remained unchanged.
Governor of the Bank of Russia Elvira Nabiullina said that the central bank does not plan to change the rate until the end of the year, referring to “adaptation” to a “new reality”.
After Russia was hit with Western sanctions over Ukraine’s attack, the bank dramatically raised its key interest rate from 9.5 percent to 20 percent in a bid to counter inflation and prop up the ruble.
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