MOSCOW, Russia: Russia's central bank has said that the country's economic contraction will deepen in the third quarter of 2022.

The strong national current account surplus, the key driver of the rouble's recent rebound, will also shrink in the second half of the year, it added.

After Moscow's invasion of Ukraine, which began on 24th February and led the West to impose comprehensive financial and economic sanctions, Russia's export-dependent economy is plunging into recession.

The central also said that gross domestic product will fall by 7 percent in the third quarter, after contracting by 4.3 percent in the second, but the Russian economy will begin recovering in the second half of 2023.

In a report, it said, "According to the Bank of Russia's updated forecast, the contraction in 2022 will be less deep than expected in April. At the same time, the impact of supply shocks may be more protracted over time."

In 2022, the economy will shrink by 4 to 6 percent and by 1 to 4 percent in 2023, before returning to growth of 1.5 to 2.5 percent in 2024, it added, noting its forecast in July when it cut its key interest rate to 8 percent.

The budget rule, which caps Russia's budget spending and diverts excess oil revenues into its rainy-day fund, will be reinstated by the finance ministry from 2023, the central bank stressed.

Yet to be announced by the finance ministry and approved by President Vladimir Putin, the new budget rule is expected to put downside pressure on the rouble, which has become the world's best-performing currency this year due to capital control measures.