Sanctions-hit Russia says its economy will shrink by 3pc

THE Kremlin has claimed that the Russian economy will shrink by just 3pc this year, as Moscow seeks to downplay the disastrous impact of Western sanctions on its finances.

Andrei Belousov, the first deputy prime minister, has said that Russia’s gross domestic product will fall by “a little more than 2pc” this year, followed by a decline of no more than 1pc in 2023.

His claims come despite unprecedented sanctions hitting the country after its invasion of Ukraine.

Mr Belousov added that despite the reduction in trade with other nations and departure of many foreign companies from Russia, the government had seen no impact on its labour market. He went on to claim that imports of consumer goods had nearly recovered thanks to the introduction of new trade routes.

The claims fly in the face of evidence that the Russian economy is being “catastrophically” crippled by Western sanctions. While the Kremlin has limited the number of official data releases it produces, analysts at Yale University studying private Russian language and “unconventional data sources” have found that imports have collapsed and domestic production has come to “a complete standstill”.

Analysts at Yale also found that following an exodus of foreign business, Russia had lost companies representing around 40pc of its GDP, reversing nearly 30 years worth of foreign investment. Their report, based on non-public analyses by investment banks, high-frequency data and Russian documents,

‘The situation remains quite difficult due to restrictions on imports of investment equipment and sanctions’

found that while the exits may not have an immediate impact, they would force Russia into a “dramatic” economic transformation.

Mr Belousov did concede that inflation would be high for Russians this year. The cost of living hit a 20-year high of 17.8pc in April after the rouble collapsed to a record low, and will now end the year at 13pc, he said in a televised government meeting.

Mr Belousov said: “The situation remains quite difficult due to both restrictions on imports of investment equipment and other sanctions.”