Despite what propaganda says, the Russian economy is not doing well. Here are the latest estimates
download facebook twitter linkedin link

Even though official Russian propaganda keeps denying the crippling effect of sanctions on the country’s economy and the Russian government is trying to hide actual statistics, faсts suggest that the war and sanctions will take an increasing toll on the Russian economy in the months ahead. The latest forecasts foresee a total decline of the Russian GDP of roughly 10 % in 2022 and 2023, argues the Bank of Finland Institute for Emerging Economies in the new research.

Russian imports declined substantially in the four months following Russia’s invasion of Ukraine on February 24th. The most significant loss was technology imports leading to output problems in Russia’s technology-driven industries. The goal of total import substitution initially pursued by the Kremlin was abandoned as the Russian policymakers now claim that it was always an irrational and impossible aspiration. Instead, the politically fashionable goal at the moment is “technological sovereignty,” a condition ostensibly fostered by importing only from “friendly” countries. So far, this plan seems to have advanced slowly.

On the export side, Russian export revenue continued to grow throughout June. Exports to the EU have declined to a limited extent in volume terms, as most of the import restrictions were not in force yet in June. India and China have substantially increased purchases of Russian commodities.

However, the effect of trade restrictions and lack of alternative markets is already visible in Russia’s wood and metals industries. Moreover, other key export industries’ performance is expected to weaken gradually as EU import bans enter into force in December 2022 and February 2023. In addition, logistical problems and potentially plateauing demand after strong surges will further limit Russia’s opportunities for finding alternative markets in Asia.

These findings underline a simple fact: the notion that the Russian economy is doing fine under sanctions is a myth. Sanctions do their job, and further restrictions on critical sectors, specifically energy exports, like the purchase restrictions and price cap for Russian oil and gas, are necessary to continue pressure on Russia and deprive it of resources used for waging war on Ukraine.

Read more

download facebook twitter linkedin link
Sign up to stay up to date