Economic Effects of Russia’s Invasion and Sanctions

Join us for a presentation by Iikka Korhonen, the director of Bank of Finland Institute for Emerging Economies, and Elisa Newby, the General Secretariat of the Central Bank of Finland, on their thoughts of the Economic Effects of Russia's Invasion and Sanctions.

Russia’s invasion of Ukraine led initially to much higher energy prices for European customers and introduction of ever-tighter Western sanctions on Russia. The seminar presentation will look at effects of sanctions and companies leaving Russia – both for the European countries and Russia. Initial energy price shock had a clear negative effect on many European countries, but recently prices have declined clearly. While Finnish economy was more exposed to Russia in terms of exports, Finland was never as dependent on Russian energy as many other European countries. For Russia Western export bans have led to lower production levels in industrial sectors reliant on foreign components and international production networks. At the same time, many sectors benefit from higher military expenditures. Recently the oil price cap and the EU’s oil import ban have suppressed Russia’s tax revenue. This year Russia’s budget deficit can reach 5% of GDP, which can still be financed, mostly from the National Welfare Fund. However, such a deficit would empty the NWF.