The Daily Telegraph

Russian economy faces worst crisis in 30 years

Kremlin’s forecasts reveal economy is expected to shrink by 12pc this year as Western sanctions bite

- By Louis Ashworth and James Warrington

Russia’s economy has plunged into its worst crisis for almost three decades as the country is battered by Western sanctions, a leaked copy of the Kremlin’s own forecasts shows. The Russian finance ministry is predicting a 12 per cent collapse in GDP this year, the biggest contractio­n since 1994 when it was shifting towards capitalism under Boris Yeltsin, the first post-soviet president. A collapse would wipe out around a decade of economic growth.

RUSSIA’S economy has plunged into its worst crisis for almost three decades as the country is battered by Western sanctions, a leaked copy of the Kremlin’s own forecasts shows.

The Russian finance ministry is predicting a 12pc collapse in GDP this year, the biggest contractio­n since 1994 when it was shifting towards capitalism under Boris Yeltsin, the first post-soviet president.

A collapse would wipe out around a decade of economic growth. The leak will pile pressure on Vladimir Putin, who yesterday presided over a scaleddown version of Russia’s annual Victory Day parade in Moscow marking the end of the Second World War in Europe.

Russia has been hammered by heavy sanctions following the invasion of Ukraine, which are about to be ratcheted up further as Brussels discusses a ban on oil from the country.

It has left the Kremlin teetering on the edge of a default after it last week narrowly avoided a failure to pay foreign debts for the first time since the Bolshevik revolution a century ago.

The Kremlin has yet to issue a public economic outlook, but the finance ministry’s figures – seen by Bloomberg – are more pessimisti­c than the central bank’s forecasts of a contractio­n between 8pc and 10pc this year. The Internatio­nal Monetary Fund expects an 8.5pc decline.

The president did not use the Victory Day speech to formally declare war against Ukraine or announce a largerscal­e mobilisati­on as feared, continuing to refer to the conflict as a “special operation”.

Krishna Guha, an analyst at Evercore, said Mr Putin “is wary of risking domestic support for the war through mass conscripti­on”.

Meanwhile, European officials are locked in talks over how to press ahead with a mooted buying ban on Russian oil and gas. The European Commission is reportedly mulling offering more money to landlocked eastern European countries to build support for a boycott, which is facing stiff opposi- tion from Hungary.

Britain and the US have vowed to ditch Russian oil, and European countries are also seeking to wean themselves off gas supplies from Moscow.

Russia’s central bank has repeatedly slashed interest rates in recent weeks after raising them at the onset of conflict. The cuts, aimed at driving spending, came despite a surge in inflation to 17.7pc.

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