Sanctions hit will see Russia economy contract 20% Q/Q in second quarter - JPMorgan

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LONDON (Reuters) - Russia’s economy is expected to contract 20% in the second quarter and by around 3.5% for the full year following intensified sanctions, JPMorgan said on Monday.

“If these new sanctions are indeed imposed, the impact on the Russian economy would be severe,” Jahangir Aziz at JPMorgan said in a note to clients.

“The two pillars of the economy even in the midst of slowing growth, rising inflation, and high interest rates were the ‘fortress’ FX reserves of CBR and Russia’s current account surplus. Not anymore.”

JPMorgan also lowered its forecast for Russia’s trend growth to 1.0% from 1.75% as growing political and economic isolation will crimp expansion in years to come.

Russia inflation is expected to stand at 10% at year-end with risks heavily skewed to upside, the bank added.

Reporting by Karin Strohecker; Editing by Saikat Chatterjee