Russia enters recession - The Moscow Times

Russia enters recession – The Moscow Times

Russia’s economy has slipped into recession, with gross domestic output falling 4% in the third quarter, according to early estimates released Wednesday by the national statistics agency, Rosstat.

The drop in GDP follows a similar contraction of 4% in the second quarter, as Western sanctions hit the Russian economy following Moscow’s offensive in Ukraine.

The 4% drop in economic output between July and September was less than the 4.5% contraction that analysts had expected.

The contraction was driven by a 22.6% drop in wholesale trade and a 9.1% drop in retail trade.

On the positive side, construction increased by 6.7% and agriculture by 6.2%.

A recession is generally defined as two consecutive quarters of economic contraction, and Russia last experienced a technical recession in late 2020 and early 2021 as the world navigated the coronavirus pandemic.

The Russian economy did well at the start of 2022 with a 3.5% increase in GDP, but the start of the Ukrainian offensive triggered a wave of sanctions from the West.

Export and import restrictions, staff shortages and spare parts supply problems have strained the Russian economy.

On November 8, the central bank predicted that gross domestic product would contract by 3.5% this year.

The IMF and the World Bank estimate a fall in Russian GDP of 3.4% and 4.5% respectively.

Despite a shrinking economy, Russia’s unemployment rate stood at 3.9% in September, according to Rosstat.

In October, the Russian central bank maintained its key rate at 7.5%. It was the first time since the start of the military offensive in Ukraine that the key rate remained unchanged.

The central bank does not plan to change the rate before the end of the year, a sign of “adjustment” to a “new reality”, Bank of Russia Governor Elvira Nabiullina said.

After Russia was hit with Western sanctions following the Ukrainian offensive, the bank dramatically raised its key rate from 9.5% to 20% in a bid to counter inflation and support the rouble.

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