.png)
The economy of Russia expanded by a rate of 3.6% in 2023, despite being one of the worst affected nations by sanctions in 2022.
This is why things may turn out better than anticipated:
Individuals are still working and are even being promoted, given salary increases. There is a possibility that high military spending is helping to stimulate the economy. They trade more goods with non-western countries.
Do you recall all the penalties imposed on Russia? Remarkably, though, their economy isn’t collapsing. This is an explanation of why:
Leaky Oil Sanctions: The West was relatively easy on Russia in its Circular Economy aspect, especially in oil exportation, while being extremely harsh on countries such as Iran. They feared that their own economies would be negatively affected in the case of higher prices of oil. They thus allowed some oil to continue to flow particularly to China and the Indian subcontinent. It can be concluded that the sale of oil still remains a profitable business for Russia.
Increased Investment: Russian companies are investing especially in the industrial and defence areas. This is because of demands for resources for the war, however, secondary sanctions forced Russia to concentrate on local production rather than importing the required items. Some of the international organizations are still stuck here, pinning their hopes that the circumstances will not worsen and the sanctions will not be placed again.
Russians Are Still Buying: The population of Russians is still spending! This is so since the employment rate is high, there are many opportunities to secure employment, wages are rising, and credit is easily accessed.
Government Spending Increases, But Not Too Much: The Russian government is now extending more of its supply, especially in the defence section. However, as would be expected, total spending is not really through the roof either way.
Sanctions? Experienced, Accomplished: As you may remember, sanctions were put on Crimea in 2014. Since, Russia has been dealing with them for some time now, they are now used to outsmarting them. Elvira Nabiullina, the head of Russia’s central bank is a key actor in this. Despite the fines that were set, she is said to have raised interest rates, aiming at restoring stability in the economy.
While the economy has been enjoying this run of good times…well, it might not last indefinitely. Further, the IMF, an organization that oversees the global economy, forecasted that the global growth would be weak in 2024 partly because Russia has made it difficult to use financial resources through more stringent controls on spending or cutting discretionary spending where it is now allowed.
It should be noted that while the economy of Russia is rather robust, even in the current environment, things are not fully ideal. It is clear that the consequences of the sanctions are still in force and that there is no information about future policy.
Thank you.
Regards,
Kautilya, IBS Mumbai.
Comments