Russia’s Economy Digests Sanctions Better Than Expected

The Russian economy seems to be digesting the sanctions against the country because of the war in Ukraine better than previously expected.

For example, the contraction will be less than previously forecast, according to reports Reuters news agency that saw new forecasts from the Russian Ministry of Economic Affairs. Inflation is also expected to be lower than previously forecast.

According to new data, consumer prices in Russia fell for the sixth week in the period through August 15. Mainly due to the lower demand. In addition, the ruble’s appreciation also ensures that prices remain stable.

However, inflation in Russia remains high. The invasion of Ukraine at the end of February and the sanctions imposed have made almost everything from vegetables and sugar to clothing and smartphones significantly more expensive. So far, consumer prices have risen 10.7 percent this year, compared with a 4.7 percent increase in 2021, data from Russia’s statistics agency Rosstat showed.

There has therefore been a cautious decline in recent times. Even after Russia’s central bank cut its key interest rate to 8 percent last month. In addition, policymakers indicated they were willing to consider further monetary easing to limit the depth of the economic recession.

A separate set of data from Rosstat showed on Wednesday that the producer price index, the gauge of the prices suppliers charge their customers, fell sharply year on year from 11.3 percent in June to 6.1 percent in July. In April, this was still more than 30 percent.