Moscow, 3 March 2022 (TDI): The Russian Economy could sink by as much as 7% as the United States and the European Union continue levying stringent measures in form of sanctions on the country as it continues its advances into the former soviet state, Ukraine.
As sanctions continue to surmount, they have started to take an ever-increasing effect on the Russian economy, with a recession that is expected to be far greater than what was experienced with COVID-19.
The financial markets in Russia are taking the biggest hits as the country was suspended from accessing the SWIFT payment system.
“This will ensure that these banks are disconnected from the international financial system and harm their ability to operate globally,” -The United States, Canada, The United Kingdom, and the European Union in a joint statement on removing Russia from the SWIFT payment system.
Analysts at Goldman Sachs predict that Russia’s GDP will decline by 7% this year after posting a 2% increase before the invasion happened. With Russia accounting for 1.5% of the global GDP it is likely the decline will affect more than just the invading country.
The ban on Russia’s Central Bank, Finance Ministry, and the freezing of the country’s sovereign fund will make it difficult for them to access their foreign reserves, which amount to 0 billion.
This ban also targets the funds the military set aside to use to finance their efforts in Ukraine. With Russian aircrafts banned from entering European airspace, the shock to the economy is set to be even higher.
Energy sanctions are currently under discussion in Washington and Europe. These sanctions are also set to severely affect Europe’s fuel prices.
In the case of Russia abruptly switching off gas supplies, the European Union will switch to nuclear energy and coal-fired stations as a backup.
Oxford Economics analysts echoed Goldman Sachs’s analysis and said that increasing pressure on Russia’s financial markets could severely affect the country’s GDP. They added the GDP could decline by as much as 6% to a pre-crisis forecast.
