Ukraine invasion: JPMorgan predicts Russian economy to shrink 35pc owing to sanctions

JPMorgan said Thursday that it expects Russia’s economy will come to a virtual halt due to global sanctions against the country for its invasion of Ukraine.

The Wall Street firm expects Russia’s gross domestic product to contract by 35% in the second quarter of 2022 and 7% for the full year, a dramatic slowdown comparable to the financial crises of 1998 and 2008.

“Sanctions and decisions of foreign businesses to pause or halt Russia operations have led to a stall in international trade, reduced output, and supply-chain disruptions,” JPMorgan strategist Anatoliy Shal wrote in a note to clients entitled “Russia: A sudden stop.”

“The shock implies a lower potential output, which will be accompanied with a spike in prices — A credit crunch will add to pain, although there are signs that the run on banks is easing,” Shal added.

Meanwhile, Russia’s invasion of Ukraine enters its second week Thursday as fighting continues across the smaller country.

There were conflicting reports about which side controls the city of Kherson. Ukrainians still control capital Kyiv despite Russian efforts to overtake the city. Port city Maripol and Kharkiv, Ukraine’s second biggest city, experienced heavy shelling Wednesday.

Specific accounts of military activity are difficult to confirm as the situation on the ground in Ukraine can change quickly.

SOURCE: CNBC