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IMF: Russia is facing a deep recession

The Russian economy will face a deep recession this year, says International Monetary Fund (IMF) managing director Kristalina Georgieva.

Military operations in Ukraine are destroying this country, but they are also destructive for Russia. It will also fall into a deep recession, Georgieva said today at the World Government Summit in Dubai.

As for the recovery of the global economy after the coronavirus pandemic, Georgieva stressed that this process is gaining momentum.

“The global economy is still recovering from the pandemic. We are starting at the lowest point, and we were hoping for more growth and lower inflation. However, we got just the opposite – a decrease in growth and an increase in inflation.”

Meanwhile, ratings agency Standard & Poor’s expects Russia’s real gross domestic product to fall 8.5% this year, from its previous forecast of 2.7%. This is stated on the agency’s website with reference to tough international sanctions against the country, as well as to breaking ties with Western companies.

The Russian economy has been hit hard by the impact of international sanctions and the decision by Western companies to either suspend operations in Russia or cut ties with the country altogether, Standard & Poor’s added. At the same time, such a combination of sanctions, as against Russia, has not yet been applied to a large globally integrated economy, so it is difficult to predict how strong the impact of punitive measures will be, except for a serious one, the rating agency notes.

The Russian-Ukrainian conflict could exacerbate the shortage of goods and lead to higher prices, experts from the rating agency say. According to Standard & Poor’s, Russia is an important exporter of hydrocarbons, fertilizers and metals, while Russia and Ukraine are major producers of cereals, especially wheat and corn.

Russia faces difficulties in exporting some of its products due to sanctions, logistics problems and the reluctance of some trading partners to buy Russian goods, and Ukraine is largely physically cut off from distribution channels, the rating agency notes. She added that Belarus, which is also under international sanctions, is a major exporter of fertilizers, especially potassium carbonate, which accounts for nearly a fifth of global exports.

Thus, the conflict leads to a huge jump in prices. According to Standard & Poor’s, the prices of some goods have risen in price by more than 30 percent in the past two weeks.

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