The flood of sanctions against Moscow is bringing the Russian economy to its knees.

Russia's gross domestic product is expected to contract by 8.5% this year, according to the latest IMF forecasts released on Tuesday.

But the war will especially hit Ukraine's economy hard.

Its GDP should thus collapse by 35%.

This represents respectively 11.3 and 38.5 percentage points less than in the previous forecasts from January.

For the Russian economy, "it's a very, very significant shock," said Pierre-Olivier Gourinchas, chief economist of the International Monetary Fund.

Moscow still manages to support its economy

That being said, “there are two reasons why, in a sense, this shock is not more important”.

“The first is that the Russian authorities have implemented support programs (…) to try to stabilize the economy (…) and secondly, we must bear in mind that the sanctions do not yet affect the trade of energy and that Russia therefore continues to sell oil and gas for the rest of the world", explains the economist.

Russia is thus still reaping revenues that it can use to support its economy.

"So the sanctions have a very big effect but the impact could be much bigger."

Among the sanctions taken by the United States and its allies, trade and financial sanctions including the exclusion of certain Russian banks from the international Swift payment system and the banning of access to the assets of the Central Bank.

But after collapsing by 60%, the ruble has returned to near pre-war levels.

The IMF nevertheless notes that the departure of foreign companies from Russia affects many industries including aeronautics and air transport, finance, the IT sector and agriculture.

"Therefore, the outlook remains bleak."

Moreover, a loss of investor confidence will lead to a significant decline in private investment and consumption, which can only be “partially offset by fiscal spending”.

The baseline forecast therefore calls for a sharp contraction in 2022, and a further decline of around 2.3% in 2023. would be much larger.

A surely “very severe” fall in Ukraine in 2023

With regard to Ukraine, the Fund insists on the uncertainty surrounding its projections because “it is impossible to obtain precise data on the damage caused to the economy”.

But given the massive destruction of infrastructure and the millions of displaced people, the institution warns that the contraction will be “very severe”.

Moreover, the Fund does not forecast for 2023 for Ukraine given the degree of uncertainty.

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