LONDON, September 28. /TASS/. The European Bank for Reconstruction (EBRD) and Development has upgraded its outlook on Russia's GDP contraction in 2022 to 5%, but downgraded its projection for 2023, suggesting GDP would contract by 3%, according to a revised report on the state of economy in the region released on Wednesday.

"The impact of sanctions on activity has been severe, but not as bad as expected. This results on the one hand from the steps taken by the central bank to prevent a financial crisis, and on the other due to the limited sanctioning of the energy sector, reflecting the significant dependence of those imposing the sanctions on Russian energy," the report said.

"But the non-oil economy, particularly sectors dependent on foreign imports, has been hit hard. The economy is expected to contract by 5 per cent in 2022 and by a further 3 per cent in 2023. The medium-term growth outlook is likely to remain bleak in the absence of a peace agreement that results in a loosening of sanctions," the EBRD noted, adding that "the economy's shift towards autarky and the loss of qualified workforce to emigration means that long-term growth potential will remain significantly eroded."