The Economy of Russia Threatened by Recession in 2023

VIVA – Russia's national statistics agency, Rosstat, announced that the gross domestic product (GDP) in Russia fell by four percent in Q3-2022. This indicates that the Russian economy is in danger of slipping into recession, as the same decline occurred in the second quarter of 2022. Western sanctions hit the Russian economy due to Moscow's invasion of Ukraine.

As reported by The Moscow Times, on November 17, 2022, the contraction of the Russian economy was driven by the decline in wholesale trade in the country by 22.6 percent. Meanwhile, retail trade fell 9.1 percent.

However, the construction sector in Russia increased by 6.7 percent and the agricultural sector also increased by 6.2 percent.

As known, a country's economy is defined as being in recession when there is a contraction of two consecutive quarters. Russia last experienced a technical recession in late 2020 and early 2021 when the COVID-19 pandemic spread.

In early 2022, the Russian economy was on the rise with a 3.5 percent increase in GDP. However, the invasion of Ukraine triggered a series of western sanctions that led to an economic downturn.

Thus, there were export and import restrictions, labor reductions, and problems with the supply of industrial parts. This certainly weighed on the Russian economy.

On November 8, the central bank of Russia predicted that GDP would contract by 3.5 percent this year. Meanwhile, the IMF and World Bank projected a decline in Russia's GDP of 3.4 percent and 4.5 percent, respectively.

According to Rosstat, despite the contraction of the economy, Russia's unemployment rate reached 3.9 percent in September. Meanwhile in October, Russia's central bank kept its key interest rate at 7.5 percent. 

The decision was the first time since the beginning of the military offensive in Ukraine that the rate remained unchanged.