Two weeks into Russia’s invasion of Ukraine, the war has inflicted a domestic toll that’s already comparable to the worst downturns of President Vladimir Putin’s more than two decades in power.

Tripped up by international sanctions, an economy that was on track to expand for a second year swung into reverse in a matter of days. In one of the first assessments of the damage already done, Bloomberg Economics’ nowcast suggests output has fallen about 2% — a drop that rivals the full-year contraction during the pandemic in 2020.

The decline means more than $30 billion has been erased from Russia’s annual gross domestic product, based on last year’s prices. Bloomberg Economics’ initial forecast is for Russia’s full-year GDP to slump about 9% in 2022.

Putin sought to reassure Russians on Friday, insisting that the Soviet Union grew and “achieved colossal successes” while under sanctions.

But the depth of hardship at home may well test the nation’s resolve should the war in Ukraine turn into a prolonged conflict and result in additional sanctions. Russia is already headed for one of its biggest inflation spikes this century and the risk of shortages is prompting the government to impose restrictions on exports.

Bloomberg Economics’ gauge of activity suggests the collapse in the early days of the war resembles downturns during the COVID-19 shock and the global financial crisis. GDP shrank almost 8% in 2009.


The outlook for the year ahead is fluid and estimates vary widely among economists, ranging from the Institute of International Finance’s call for a “very deep recession” of 15% to a contraction of 7% seen by JPMorgan Chase & Co. and Goldman Sachs Group Inc.

A March survey of analysts by the Bank of Russia found the economy is expected to shrink 8% this year, compared with February’s forecast for a gain of 2.4%.

The nowcast points to a large economic impact, based on the little information that’s available. But a much more severe downturn likely lies ahead, given the scope of the dislocation in Russia’s economy.

The measure may be understating the extent of the decline because stock prices are one of its four main components and the extended closure of local equity markets limits the amount of data. Bloomberg Economics factored in the performance of Russian securities before MSCI Inc. removed them from its indexes.

Other inputs used to measure activity are the ruble-dollar exchange rate, corporate bond yields and oil prices.

Despite capital controls and the biggest interest-rate increase in almost two decades, the ruble has lost about 37% of its value in this year’s worst performance worldwide.

Russia is moving into a “deep recession,” with the ruble’s plunge driving up inflation and severely denting the purchasing power of the Russian population, International Monetary Fund Managing Director Kristalina Georgieva told reporters Thursday.


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