Four weeks of war mark the Russian economy

A month later, the Russian currency lost most of its value, and its bonds and stocks were thrown out of the indices. Its population is in economic pain that is likely to last for years.

Below are five charts showing how the last month has changed the Russian economy and its global status:


According to the World Bank, in 2020 Russia was the 11th largest economy in the world. But by the end of this year, it may be no higher than 15th, based on the ruble’s exchange rate at the end of February, according to Jim O’Neill, the former Goldman Sachs economist who came up with it. major emerging economies: Brazil, Russia, India and China.

A recession seems inevitable. Economists polled by the central bank predict an 8% contraction this year and 20% inflation.

The outlook for economists outside of Russia is even bleaker. The Institute of International Finance predicts a contraction of 15% in 2022 and then 3% in 2023.

“Overall, our projections imply that current events will negate economic benefits in about fifteen years,” the IIR said in a statement.

(Chart: IIF by Russian GDP –


Since taking office in 2013, central bank chief Elvira Nabiullina’s greatest victory has been to contain inflation, which dropped from 17% in 2015 to just over 2% in early 2018. raising interest rates for eight consecutive months.

Nabiullina also resisted calls in 2014–2015 to introduce capital controls to stop capital flight after the annexation of Crimea.

But those gains were torn to shreds in less than a month.

Annual price growth has accelerated to 14.5% and should exceed 20%, five times the target. Household inflation projections for the coming year are above 18%, an 11-year high.

If panic buying explains part of this phenomenon, ruble weakness could support high price pressure.

As Russian reserves abroad were frozen, Ms. Nabiullina was forced to more than double interest rates on February 28 and impose capital controls. The central bank now expects inflation to return to its target only in 2024.

(Chart: Inflation in Russia –


The sanctions are forcing index providers to exclude Russia from the benchmarks used by investors to funnel billions of dollars into emerging markets.

JPMorgan and MSCI announced the exclusion of Russia from their bond and stock indices, respectively.

Russia’s place in these indexes has already suffered with the first round of Western sanctions in 2014, then again in 2018, after the poisoning of a former Russian spy in the UK and an investigation into alleged Russian interference in the 2016 US elections.

On March 31, the weight of Russia will be reduced to zero by almost all major index providers.
. Chart: Weighting Russia in JPMorgan Bond Indices –


When Russian troops swept into Ukraine, their country received a coveted investment grade credit rating from the big three agencies S&P Global, Moody’s and Fitch.

This made it possible to borrow relatively cheaply, and a default on sovereign debt seemed a distant prospect.

Over the past four weeks, Russia has experienced the largest sovereign credit rating downgrade in history. It is now at the bottom of the rating scale, indicating an imminent risk of default. (Chart: Russia’s credit rating is experiencing the biggest drop in the world –



A month ago, the average exchange rate of the ruble for the year was 74 dollars per dollar. Trading on various platforms showed ample liquidity and tight bid-ask spreads expected for an emerging market major currency.

All this has changed. With the central bank stripped of most of its hard currency reserves, the ruble has fallen to an all-time low of over 120 to the dollar locally. On offshore exchanges, it fell to $160 per dollar.

Due to liquidity drying up and widening spreads between bid and ask prices, ruble valuation has become unsystematic. The exchange rate has not yet found a balance
he is offshore. Chart: The ruble exchange rate in conditions of tight liquidity –

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