The Russian economy will shrink by both four percent this year and next, the Bank of Finland said in its latest Russia forecast, published on Monday.

In a statement titled "War bleeds the Russian economy," the central bank said (siirryt toiseen palveluun) western sanctions continue to raise both the "direct and incidental costs of war."

"The Russian economy is decoupling from the world economy," Laura Solanko, a bank senior adviser, said in the statement.

EU import bans are reducing Russian budget revenues, while export bans are limiting Russia's ability to arm and supply its invasion force, the bank explained.

BoF economists forecast the Russian economy facing a serious recession.

"The lack of access to high-tech inputs is eroding Russia's opportunities for future growth," the bank said in a statement.

The central bank further predicted that Russia's cooperation with China will only replace a fraction of the western relationships lost.