Goldman Sachs, "Russia's Economic Growth Forecast for This Year Revised Down to -7%"

[Image source=Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] Global investment bank Goldman Sachs announced that it is significantly lowering its forecast for Russia's GDP growth rate this year to -7%. Analysts believe that due to sanctions imposed by the US and Western countries following the Ukraine war, along with global companies successively halting transactions, Russia will face a greater economic fallout than from COVID-19.

According to the UK Guardian on the 2nd (local time), Goldman Sachs stated in a report that it is revising Russia's GDP growth forecast for this year down from the previous 2% to -7%. Previously, according to the International Monetary Fund (IMF), the Russian economy recorded -3% in 2020 due to the impact of COVID-19 but grew by 4.5% last year.

Goldman Sachs cited the main reason for this downward revision as the impact of sanctions by the US and Western countries following the invasion of Ukraine. Following the announcement of financial sanctions by various countries, the Russian ruble exchange rate is plummeting, and with companies successively halting transactions, economic isolation is intensifying, which is expected to cause even greater damage going forward.

Within Russia, major asset holders and businessmen are reportedly moving their wealth overseas, and the 'bank run' phenomenon, where citizens simultaneously withdraw funds from banks, is worsening. In response, the Russian government recently banned overseas transfers exceeding $10,000 and raised the central bank interest rate to 20%, more than double the previous rate.

Experts express concern that if Russia does not move toward a ceasefire, Western countries may begin to impose full sanctions on Russian energy exports. In an interview with the Guardian, Ines McPhee, Chief Global Economist at Oxford Economics, said, "If the war prolongs and Russia continues its involvement in the Ukraine war next year, the Russian economy is expected to contract by more than -7% again next year," adding, "If Western countries completely stop importing Russian natural gas and oil, the economic damage will be even more severe."