(Reuters) – Russia’s economy is expected to contract less this year than anticipated and inflation will drop than originally thought. This was according to a Reuters poll that took place Tuesday after the fourth month of what Moscow called a “special military operation” in Ukraine.

Russia’s export dependent economy will plunge into recession as a result of Moscow sending tens to thousands of troops into Ukraine on February 24, in an action that provoked sweeping Western sanctions including partial freezing its reserves.

Late May polling by 18 analysts suggested that Russia’s economy is on the verge of shrinking 7.6%. Similar polls in April forecasted an 8.4% economic contraction.

As officials revise their forecasts, the outlooks for the future are improving. According to a presidential adviser, the economy won’t contract more than 5% by 2022. The announcement came weeks after the Economy Ministry had said the gross domestic product would fall by more than 12 percent. This is the worst GDP drop since 1991.

As inflation has fallen to levels economists and officials feared would be the result of Russia’s intervention in Ukraine, this could explain why there is a less hawkish monetary strategy.

Full-year inflation now expected to rise to 16.4% from 8.4% in 2021. However, this is still well below the expectations of a 20% increase in consumer prices last month.

The central bank could have the ability to reduce the key rate to 8.0% in the next year, compared to 10.5% as predicted by the last poll. The central bank targets inflation of 4%.

In May, the central banking cut its key rate by 300 basis point to 11%. It did this at an unscheduled meeting.

Slowing inflation is due to slow domestic consumer demand and a rapid appreciation of the rouble. This is due to capital controls, Russia’s record-breaking current account surplus and high commodity export prices. Imports have fallen rapidly as well.

However, market expectations can change rapidly in this volatile environment. This is driven to some extent by geopolitical factors. The rouble could weaken further into the year.

In a year, the rouble will trade at 77.80 to the dollar against the dollar. This is compared to an expected rate of 83.50 that was predicted by analysts late April. The official rate on Tuesday was 63.10 rubles per dollar.