MOSCOW: Russia is facing the deepest economic contraction in nearly three decades as pressure from sanctions imposed by the United States and its allies mounts, according to an internal forecast by the Finance Ministry.

       Gross domestic product is likely to shrink as much as 12% this year, deeper than the 8% decline expected by the Economy Ministry, according to sources.

       The government hasn’t released a public forecast since the invasion of Ukraine.

       The Finance Ministry issued a statement yesterday saying the report of the forecast was inaccurate.

       “Preparation of official macroeconomic forecasts does not fall under the Finance Ministry’s authority,” it said, noting that it “expects that the measures taken by the government and the Bank of Russia will make it possible to ease to a large extent the negative consequences of sanctions and ensure stable economic development.”

       A 12% contraction would put the economic pain on par with the turmoil seen in the early 90s, when Russia’s Soviet-era economy lurched toward capitalism with a contraction not seen since wartime.

       “The main negatives are the oil embargo, the European Union giving up Russian gas, along with more departures among foreign companies,” said Natalia Lavrova, chief economist at BCS Financial Group in Moscow.

       “All that will probably expand gradually, with a lot of negative carrying over into 2023.”

       Excluding those factors and based only on current sanctions, she forecasts a contraction of 10.8% in 2022 and about 5% in 2023.

       The Bank of Russia had expected a contraction between 8% and 10% this year. The International Monetary Fund forecast one of 8.5%, while a Bloomberg survey of economists found a median decline of 10.3%.

       If the Finance Ministry’s forecast proves accurate, that would erase about a decade of economic growth, according to a source.

       Uncertainty about the outlook remains very high as the war continues and the United States and its allies discuss further sanctions, including on key exports like oil, the sources said.

       The press service at the Economy Ministry didn’t respond to a request for comment. Separately, the European Bank for Reconstruction and Development said Ukraine’s economy will plunge by almost a third in 2022, more than previously expected, in a scenario where the war ends this year. — Bloomberg