Western Anti-Russia Sanctions Hold Back Russian Economy

As the Russian economy begins to emerge from a recession, road-blocks from anti-Russia sanctions stand in the way of further growth

Following the IMF’s Article IV mission to Russia, it released a statement on Friday stating that “the economy is exiting a two-year recession that, thanks to the [Russian] authorities’ effective policy response and the existence of robust buffers, proved shallower than past downturns. Growth is expected to reach 1.4 percent this year, supported by easier financial conditions and higher oil prices.”

However, further growth is stunted by structural limitations and Western anti-Russia sanctions that weigh down on the Russian economy. The IMF reported in its statement that medium-term growth would be subdued, at about 1.5 percent, due to “structural bottlenecks” such as demographic and technological hindrances, as well as the effects of sanctions that restrain the potential for increasing investments.

Among the IMF’s recommendations of primary tasks to ensure further growth were goals like introducing a fiscal rule to generate savings and damped oil price impact on the economy, as well as reaching the Central Bank’s four percent inflation target while keeping a balance between inflation and recovery risks.

Russia is emerging from a two-year recession that began due to collapsing commodity prices – including oil – as well as Western sanctions. The rate of contraction is estimated to have fallen steeply, from a whopping 4 percent in 2015 to only 0.5 percent in 2016. The Economic Development Ministry’s 2017 target scenario forecast is a GDP increase of 2 percent.