The Kremlin is bracing for sanctions to deal a much bigger blow to the Russian economy than it has publicly admitted as it draws up scenarios where GDP does not recover until the end of the decade.
Its economy minister confirmed leaked documents that predicted the financial toll of its invasion of Ukraine will worsen next year as it shuts off energy supplies to Europe and imports of key goods dwindle.
Under the worst of three scenarios envisaged in the internal report revealed by Bloomberg, Russian GDP plunges by 12pc by 2024 compared to 2021 and does not fully recover by 2030.
In the “inertial” scenario, Russia suffers a 8.3pc peak-to-trough slump by next year, taking until the latter half of the 2020s to bounce back.
The report warned of a “reduced production volumes in a range of export-oriented sectors” that are the lifeblood of the Russian economy, such as metals and oil and gas.
The West is clamping down on the import of commodities from Russia while the Kremlin itself has cut off a key revenue source by squeezing Europe’s gas supplies. A full shutoff of gas to Europe would cost 400 billion rubles (£5.65bn) in lost tax revenues, according to the report.
It also said there is a big risk of production being suspended due to Russian firms struggling to bring in materials as there are “simply no alternative suppliers for some critical imports”. The agriculture, aviation and pharmaceutical sectors are all heavily reliant on the import of products and Western technology, the documents noted.
The report presents a far more pessimistic outlook for the Russian economy than portrayed by the Kremlin with Vladimir Putin saying it can overcome Western sanctions.
Russia’s central bank has predicted that the economy will shrink by between 4-6pc this year and a further 1-4pc in 2023 before returning to growth.
Economists at JP Morgan said the hard data suggests that Russia’s economy “largely stabilised” going into the second half of this year but warned of further pain ahead.
They said: “[A] potential oil price cap, and, hence, [a] much deeper drop in oil output, is, arguably, the main downside risk for the near-term outlook.
“We lowered our growth forecasts at the turn of the year to reflect the expected drop in oil output once the EU ban on Russian oil comes into force in December-February.”