MOSCOW (Reuters) -- Russia's economy contracted 2.1% last year, the federal statistics service said on Monday, compared with a 5.6% year-on-year rise in 2021, hurt by the fallout from Moscow's decision to send tens of thousands of troops into Ukraine last February.
Rosstat's first gross domestic product (GDP) estimate for 2022 was a marked improvement on forecasts made soon after the conflict began. The economy ministry at one point predicted that Russia's economy would shrink more than 12% last year, exceeding the falls in output seen after the Soviet Union collapsed and during the 1998 financial crisis.
Before the conflict in Ukraine began, the Russian government had expected GDP growth of 3% in 2022.
Manufacturing industries and wholesale and retail trade were among the sectors that declined in 2022, while agriculture, hospitality, construction and mining all registered growth.
Public administration and "military security" gained 4.1% in 2022, the statistics agency said, adding to a 3.3% rise in 2021. President Vladimir Putin in January paid tribute to the defense sector for supporting Russia's economy.
Increased military spending is smoothing out a drop in Russia's industrial production, analysts say.
Net exports increased to 12.8% from 9.3%, "due to the prices of exported fuel and energy products being significantly above imports."
Russia's current account surplus hit a record high in 2022, as a fall in imports and robust oil and gas exports kept foreign money flowing in despite Western efforts to isolate the Russian economy over the conflict in Ukraine.
In January, the surplus shrank 58.2% year-on-year to $8 billion, squeezing Russia's capital buffers at a time when Moscow is ramping up budget spending.
Russia's central bank on Monday estimated the 2022 economic contraction at 2.5%.
Forecasts for 2023 are varied. The government expects a decline of 0.8%, while the International Monetary Fund believes the Russian economy could grow by 0.3% as commodity exports have proved resilient.