Russia’s invasion of Ukraine will pull its economy back into 2007 and wipe out 15 years of gains, financial experts say

Vladimir Putin’s invasion of Ukraine will wipe out 15 years of economic growth in Russia, according to an influential association of financial experts.

The group identified several implications of the invasion that would hit Russia’s finances hard. It estimated the damage would pull the economy back to about its size in 2007.

Companies are withdrawing from Russia and laying off employees. Export slump thanks to sanctions. Talented Russians are leaving the country.

The group forecast that Russia’s economy would shrink by 15% in 2022 and another 3% in 2023.

The picture could get even worse for Russia, depending on how quickly countries in Europe implement their plan to stop consuming Russian oil and gas.

The EU agreed to halt around 90% of Russian oil imports by the end of the year, but said halting natural gas imports from Russia would take much longer.

Russia is on the brink of a historic default as it faces increasing difficulty paying its foreign creditors after being pulled out of the financial system. Domestic capital controls have supported its currency, but with energy demand falling in many parts of the world, it has had to offer fuel, particularly crude oil, at huge discounts.

The IIF report acknowledged that Russian import revenues did indeed increase after the invasion, mainly thanks to rising energy prices.

But its experts said that Russia would only feel a short-lived benefit from this phenomenon and that its isolation from Western markets would be far more significant and undermine its economy.