"Russia's GDP May Decline 15% This Year... Sufficient Fiscal Capacity Despite Ongoing War"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Lee Hyun-woo] Austrian researchers have forecasted that Russia will experience a severe economic recession with its Gross Domestic Product (GDP) declining by more than 15% due to Western sanctions, but it still has sufficient financial capacity to continue the war. As expectations arise that additional Western sanctions will have limited effect, controversy over the sanctions is expected to intensify.

According to the dpa news agency on the 5th (local time), the Vienna Institute for International Economic Studies (WIIW), an Austrian think tank, analyzed that Russia's GDP this year could decrease by at least 7-8% and up to 15% compared to last year, with an inflation rate reaching about 30%. Fazily Astrov, an economist and Russia expert participating in the study at WIIW, stated, "Supply chain problems are already being observed in many sectors due to the sanctions."

However, the researchers pointed out that Russia's ability to sustain the war will not be significantly affected despite this severe economic recession. Astrov analyzed, "The Russian government still has sufficient financial capacity to fund the war for a longer period," adding, "It is possible that soldiers and modern weapons will be depleted before Russia's war funds run out."

The economic impact on Russia is expected to occur in the medium to long term. The researchers explained, "Sanctions mean that the Russian economy cannot access Western technology," and "As a result, Russia's economic backwardness will increase compared to other parts of the world." They further predicted, "Russia will offset some of the damage, if not all, by expanding economic exchanges with major Asian economic powers, especially China."

The researchers also analyzed that Ukraine will suffer enormous economic damage from this war. So far, the estimated damage to infrastructure in Ukraine amounts to $62.6 billion (approximately 76 trillion won), with regions responsible for 53% of the GDP being directly hit, and losing half of its ports, which has disrupted trade.

The researchers forecasted, "In the long term, a significant number of Ukrainian companies will go bankrupt, causing widespread unemployment, and financial institutions will suffer major losses due to asset losses and defaults."

This content was produced with the assistance of AI translation services.