Russian Economy Faces Severe Downturn as Sanctions Bite
The Russian economy is facing a significant downturn, with industries outside the military sector struggling and the stock market today experiencing a sharp decline. This follows a period of geopolitical tensions and Western sanctions, leading to fears of a prolonged economic crisis.
Key sectors such as clothing production, furniture production, and metallurgical production have seen drops of 9.1%, 12.7%, and 8.4% respectively. The Russian stock market has reacted strongly to statements from the Russian Foreign Ministry, with the Moscow Exchange Index falling to 2563.3 points, its lowest level since December 2022, and a drop of 4.05% compared to Tuesday's close.
Major Russian companies like Gazprom, Sberbank, VTB, and Rosneft have all seen their shares fall significantly. This decline is partly due to concerns expressed by Russian officials about the prolonged impact of Western sanctions and geopolitical tensions. Deputy Foreign Minister Sergei Ryabkov has stated that relations with the US are 'destroyed to the core', with no reciprocal steps from Washington.
Investors are experiencing 'panic selling' due to geopolitical factors, according to Yaroslav Kabakov, director of strategy at Finam. The Russian economy is slowing down rapidly, with GDP growth virtually stopping at 0.4% year-on-year in July and August. The World Bank predicts a growth rate of only 0.9% this year, 0.8% next year, and 1% in 2027.
The Russian economy is facing a significant slowdown, with industries outside the military sector struggling and the stock market today experiencing a sharp decline. The Moscow Exchange Index has been falling for five weeks in a row, losing over 22% compared to its value in February, equivalent to a loss of 1.3 trillion rubles in market capitalization. The World Bank's growth predictions for Russia indicate a prolonged period of economic difficulty.
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