Russia’s economy set for biggest contraction since 1994, says former finance minister

Russia’s economy is on track to contract by more than 10% in 2022, the biggest fall in gross domestic product since the years following the 1991 fall of the Soviet Union, former finance minister Alexei Kudrin said on Tuesday.

Russia is facing soaring inflation and capital flight while grappling with a possible debt default after the West imposed crippling sanctions to punish President Vladimir Putin for sending tens of thousands of troops to Ukraine on Feb. 24.

Russia’s economy and finance ministries are currently working on new forecasts, RIA state news agency quoted Kudrin, who now serves as head of the Audit Chamber, as saying.

“The official forecast would be for more than around a 10% contraction,” said Kudrin, who served as Putin’s finance minister from 2000 to 2011, according to RIA.

Previous Russian government forecasts envisaged gross domestic product growth of 3% this year after the economy expanded by 4.7% in 2021.

A source close to the Russian government who spoke on condition of anonymity told Reuters that the economy ministry projects a GDP contraction of between 10% and 15% this year.

A contraction of 10% would amount to the biggest decline in gross domestic product since 1994, according to World Bank and International Monetary Fund data.

The World Bank this month forecast Russian GDP output would fall 11.2% this year. 

Analysts polled by Reuters in late March had on average forecast 2022 GDP contraction at 7.3%, predicting a pick up in inflation to nearly 24%, its highest since 1999. 

Putin says the “special military operation” in Ukraine is necessary because the United States was using Ukraine to threaten Russia and Moscow had to act to defend Russian-speaking people in Ukraine against persecution.

Ukraine says it is fighting against an imperial-style land grab and dismisses Putin’s claims of genocide as nonsense.