Russia is headed for a deep recession due to the effect of the harsh economic sanctions announced by the United States, the European Union (EU) and other partners in retaliation for the invasion of Ukraine, according to a report published by JP Morgan.
In the document, the team of North American researchers specialized in emerging markets points out that the punishment of the West “It will hit the target of the Russian economy, which now appears headed for a deep recession and the imposition of capital controls.”
Analysts estimate that the Russian economy will contract by 20% in the second quarter compared to the previous section, and believe that in the year as a whole it could be reduced by 3.5%, although they do not rule out a higher figure because “risks are heavily skewed to the downside”.
“In addition, we believe that Russia’s growing political and economic isolation will restrict growth potential in the coming years and will lower trend growth to 1%, from 1.75% previously.”, he adds.
Washington, in coordination with its allies, increased pressure on Monday with sanctions that prevent the Central Bank of Russia from using its dollar reserves in the world and prohibit any financial institution or US company from making transactions and operations with it.
The efforts of the Western allies are now focused on drawing up the list of Russian banks that will be excluded from the Swift international interbank communication system, which would further isolate the Russian economy from the international financial system.
The JPMorgan report highlights that the sanctions, which have frozen some $630 billion of the Russian central bank’s reserves, seek to “inflicting significant damage on the Russian economy while keeping Russian oil and natural gas exports flowing”.
“The immediate issue is whether Western allies can effectively outline exemptions for energy payments under Swift sanctions.”, add the analysts, who warn that Moscow could cut off its energy exports in retaliation.
They also warn that tensions between Russia and Ukraine “they can have a substantial effect on other commodity prices such as wheat and, more importantly, palladium, which is essential for producing semiconductors and where supply has already been tight for the last two years”.
Source: Gestion
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