Russia’s GDP Faces Potential First Quarterly Decline Since 2022 Amid Economic Challenges

Russia’s GDP may have contracted for the first time in almost three years during the first quarter of 2023, according to the Vedomosti business newspaper, which cites analysts’ predictions.

This anticipated decline occurs as the government implements measures to temper an economy that has been overheating due to the war and to address rising inflation. President Vladimir Putin referred to these initiatives last week as a “planned corrective,” although some economists caution that these efforts could lead to an excessive adjustment.

Raiffeisen Bank estimates a 0.3% decrease in Russia’s unadjusted GDP from January to March, following a 1.3% rise in the preceding quarter. Bloomberg economist Alexander Isakov predicts a greater quarterly contraction, ranging from 0.6% to 1.5%.

Analysts attribute the downturn primarily to weak industrial performance and declining oil prices.

Official economic figures are scheduled for release on May 16. Should the predicted contraction be validated, it would represent the first quarterly decline since the second quarter of 2022.

At the same time, Russia’s Economic Development Ministry anticipates a seasonally adjusted year-on-year growth rate of up to 2% for the first quarter, although this estimate may be revised once the state statistics agency Rosstat releases its official data.

The ministry projects that GDP will increase by 2.5% in 2025, a decrease from 4.3% in 2024. Analysts consider this forecast to be too optimistic.

Russia’s Central Bank, on the other hand, expects more modest annual growth ranging from 1% to 2%.