IMF Says Sanctions Have Shrunk Russian Economy 9%

Sanctions imposed on Russia because of its support for separatists in Ukraine could shrink the economy by as much as 9% over time.

That’s the view of the International Monetary Fund, which published a regular report on Russia this week.

Collapsing oil prices and Western sanctions on big banks and energy companies tipped Russia into a financial crisis at the end of 2014. The ruble plunged and inflation soared.

Russia jacked up interest rates in response, sold dollars and euros to defend its currency, pumped money into the banks and slashed government spending.

The situation has stabilized this year, although the ruble has come under pressure again recently, but the economy is already deep in recession.

The IMF expects Russian GDP to shrink by 3.4% this year, as falling real wages, the higher cost of borrowing and shattered confidence hit domestic demand. And western sanctions, and Russia’s retaliatory ban on imports of food and agricultural products, could be responsible for nearly half that decline.

via CNN

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza