The war in Ukraine probably took Russia’s economy back to 2018

• According to Bloomberg Economics, Russia’s GDP is likely to have fallen by 4.7% in the second quarter of 2022.
• It took the country’s economy back to 2018.
• Russia has been subject to sweeping sanctions since its February 24 invasion of Ukraine.

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According to Bloomberg Economics, the war in Ukraine has thrown Russia’s economy back to 2018.

That’s because Russia’s GDP is likely to have fallen 4.7% year-on-year in the second quarter of 2022 — the first drop in a year, according to 12 analysts polled by Bloomberg. The April-June period was the first full quarter since Russia invaded Ukraine on February 24. The Central Bank of Russia estimated that the Russian economy shrank by 4.3% in the second quarter of the year.

According to the news agency, according to Bloomberg Economics Russia economist Alexander Isakov, the Russian economy likely “lost four years of growth and returned to its 2018 size in the second quarter.” Russia’s economy was worth $1.66 trillion in 2018 and $1.78 trillion in 2021, according to the World Bank.

According to official data, Russia’s economy grew by 3.5% in the first quarter of 2022.

Although Russia’s economy was under pressure in the second quarter, the decline was far less than expected. Bloomberg analysts polled from March to July had expected the country’s economy to contract by about 9% to 10%.

Despite sweeping sanctions, Russia’s economy has held up better than expected — although a Yale University report last month accused the Kremlin of data-picking to paint a positive view of the country’s prospects.

But the Kremlin has been scrambling to cushion the impact of trade restrictions with programs that support the ruble and preserve jobs, analysts told Insider in June.

“We expect contraction to slow in the fourth quarter as demand is supported by looser monetary policy,” Isakov said. The Bank of Russia expects the country’s GDP to contract by 7% in the third quarter.

Russia’s economic resilience to date is also due to the fact that its energy exports are holding up thanks to a global supply tightening that is pushing up prices. The International Energy Agency (IEA) said in a report Thursday that Russia is still producing much more oil than expected this year. In fact, Russia produced more oil in July than in May and June, according to the IEA.

The Kremlin is scrambling to find alternative markets for its energy products as its traditional buyers in the European Union will ban imports of crude oil from late 2022. The bloc has already banned the country’s coal imports. European countries like Germany and Italy are also working to wean themselves off Russian natural gas.

This means things could get a lot harder for Russia going forward, as energy buyers in markets like India and China are likely to find tough deals, which the Yale report says will impact Kremlin revenues.

The EU embargo is expected to cut Russia’s crude oil production by 20% in 2023, according to the IEA in its report. Bloomberg Economics’ Isakov said he expects the Russian economy to contract by another two percentage points in 2023 because of the ban.