The consequences of Russia’s war on Ukraine will harm the country’s economy for years to come, according to US Treasury Secretary Janet Yellen on Thursday.
Western sanctions imposed since Ukraine’s invasion in late February are likely to cause a significant drop in the country’s economic growth, Yellen said at a meeting hosted by the IMF and the World Bank.
“Lost investment, including hundreds of private sector companies that have left the country and are unlikely to return,” Yellen said in prepared remarks, “will create a drag on Russia’s growth prospects for years to come.”
Major Western firms, including investment banks like Goldman Sachs and oil majors like Equinor, have also closed their offices and relocated their employees out of Russia, which Yellen expects to weigh on economic growth even more.
According to the Economist Intelligence Unit, Russia’s GDP – the standard measure of output of goods and services – is expected to fall 6.2% this year and 4.1% the following year.
Its economy is suffering as a result of Western sanctions that have hampered trade with Europe and Asia.
According to Yellen, Russia is now reliant on last-resort suppliers such as Iran and North Korea for basic military equipment.
“At the same time,” she added, “we have provided record amounts of both military and economic assistance to Ukraine.”
Goldman Sachs, on the other hand, recently raised its forecast for Russia’s economy.
On Friday, the bank stated that policies such as the Bank of Russia’s aggressive interest rate hikes would benefit the economy, and that they now expect the economy to contract by 4% rather than 6%.
“The Russian authorities loosened fiscal policy sharply to counter the economic shock to domestic demand caused by the sanctions, and the Russian economy has performed better than previously expected,” Goldman Sachs economist Clemens Grafe wrote in a research note on Thursday.