Sources: IMF and Treasury staff calculations. The war and associated multilateral sanctions are putting Russia’s economy under considerable economic strain, contributing to rapidly growing expenditures, a depreciating ruble, increasing inflation, and a tight labor market reflecting a loss of workers.įigure 1. Russia’s economy is over 5 percent smaller than had been predicted prior to the escalation, and it is far underperforming other energy exporters (including the United States). and partners’ sanctions and other economic measures, Russia’s economy in 2022 contracted by 2.1 percent (Figure 1), with record-high energy exports cushioning what would have been a far deeper contraction. MACROECONOMIC PERSPECTIVE – RUSSIA FAR BEHIND ITS POTENTIAL GDP: Russia’s Economy is Falling Behindįollowing its invasion of Ukraine and the imposition of U.S. The United States and our partners have taken innovative measures to spare the global economy from unnecessary damage from Russia’s war.Russian’s own policy responses to our sanctions are growing increasingly expensive for Russia.Russia is experiencing increasing fiscal pressure due to growing expenditures and the impact of sanctions on its revenues.Russians are voting with their feet and leaving the country. Russia’s macroeconomic performance is suffering due to its war and the impact of the United States and our partners’ sanctions and economic measures.As a result of these forces, the Russian economy is reorienting away from private consumption and towards defense spending at the expense of Russian citizens, who will face a long-term decline in living standards. and partners’ sanctions and related measures, and the Russian government’s policy response to those measures. There are three major forces acting in concert upon the Russian economy: the war itself, U.S. While Russia has the resources to maintain its war in the short-term, its leaders face increasingly painful tradeoffs that will sacrifice long-term prospects - as underinvestment, slow productivity growth, and labor shortages will only deepen. The United States and our partners have targeted Russia’s primary revenue drivers and access to defense materials, asymmetrically inflicting harm while minimizing unintended spillovers. Sanctions and export controls are damaging Russia’s economy and limiting its access to the financing and material goods needed to wage its illegitimate war of choice.

Putin is feeling the impacts of his war in Ukraine. By Rachel Lyngaas, Chief Sanctions Economist, U.S.

Growth financing