The Russian war economy: macroeconomic performance

CASE recommends Prof. Marek Dąbrowski`s article for Bruegel.

In response to Russia's invasion of Ukraine in February 2022, the United States, European Union, G7 economies, and their allies imposed extensive sanctions, with initial forecasts suggesting a severe economic impact on Russia. The European Bank for Reconstruction and Development and the International Monetary Fund predicted significant GDP decline, high inflation, and rising unemployment due to sanctions.

However, the actual economic impact on Russia in 2022 was less severe than anticipated. According to the IMF and Federal State Statistics Service, Russia's real GDP decreased by 2.1 percent, with the sharpest decline in the second quarter of the year. The sectoral structure of gross value added remained mostly stable, except for increased mineral production. Both exports and imports declined, making the economy more closed off internationally.

The unexpectedly better economic performance in 2022 can be attributed to factors such as conservative pre-invasion policies, effective monetary and fiscal policy adjustments, high global hydrocarbon prices, and delayed and incomplete adoption of oil sanctions.