Russia macro update: sharp contraction incoming

The ratcheting up of Western sanctions, alongside a tightening of financial conditions and the prospect of a banking crisis, mean that Russia’s economy is likely to experience a sharp contraction this year. The outlook of course remains incredibly uncertain, but our new baseline forecast is that inflation reaches 15% y/y in mid-2022 and GDP contracts by 5% this year (versus growth of 2.5% previously).