[Asia Economy Reporter Yujin Cho] Russia, which was expected to face economic collapse due to Western sanctions following its invasion of Ukraine, performed better than anticipated last year.
According to the British BBC and others on the 20th (local time), the Russian Federal State Statistics Service announced that Russia's Gross Domestic Product (GDP) decreased by 2.1% compared to the previous year.
The Russian Ministry of Economy had predicted that Russia's economic growth rate would exceed -12% following the invasion of Ukraine last year, but the actual decline was significantly less than expected. This is also higher than the -2.5% forecast made by President Vladimir Putin last month.
Additionally, the Russian Central Bank projected that the inflation rate and economic growth rate for the first quarter of this year would be 3.6% and -2.4%, respectively, compared to the same period last year. It also forecasted an overall inflation rate of 5-7% and an economic growth rate between -1% and 1% for this year.
Since Russia's invasion of Ukraine on February 24 last year, it has faced extensive economic sanctions from the West. The international economic community predicted that Russia's economy could collapse due to unprecedented sanctions, including the freezing of about half of Russia's gold and foreign exchange reserves.
However, following the war, energy prices surged and trade with countries such as China, India, and Middle Eastern nations increased, which is interpreted as having significantly mitigated the impact of the sanctions on Russia.
Last month, President Putin stated that although Russia's gas production decreased by 11.8% compared to the previous year, gas companies earned high profits due to rising international gas prices. He also added that oil production actually increased by 2% compared to the previous year.
Following the West's introduction of a price cap on Russian crude oil in December last year, the European Union (EU) also implemented a gas price cap starting from the 5th of this month, but these measures have not significantly damaged the Russian economy.
According to the Russian local media Kommersant, despite the Western price caps, Russian oil companies are increasing production. In the first week of February, Russia's oil production was 1.491 million tons per day, a 0.7% increase compared to the average of the previous month. This is interpreted as Russian oil companies attempting to expand export volumes by supplying oil at discounted prices despite the sanctions.
However, as the war prolongs and additional Western sanctions continue, there are ongoing forecasts that Russia's economic recession may intensify. Since the mobilization order in September last year, which conscripted about 300,000 young men, labor shortages in industrial sites have persisted.
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