By using this site, you agree to our Privacy Policy and our Terms of Use. Close
Ryuu96 on 07 April 2023
Edit Thread
Biggerboat1 said:

BBC News - Russia's economy shrinks by less than expected
https://www.bbc.co.uk/news/business-64708832

This is slightly dated info now (article is from end of Feb), but it seems nuts that Russia's economy only shrank by 2% last year...

So all of the sanctions & the pulling out of major western investment resulted in that small of a contraction - crazy.

I would have thought the conscription off the 100k+ young men alone would have had that level of effect... (I.e. young men in their prime being removed from businesses)

Is there any reason to think their economy will be hit harder this year? I know gas/oil prices have been returning to somewhat normal levels, so maybe that will reveal deeper effects that have thus far been masked by inflated energy prices.

I fear the only real incentive for putin to be given the boot will be financial. Think he & his cronies couldn't care less about the cost in blood.

This data comes from Rosstat (aka Russia) so it's hard to say how reliable it is considering how much Russia lies and that Russia stopped reporting economic raw data since last April, they aren't submitting exports/import data, foreign direct investment, etc. The IMF and everyone else can only use the figures that Rosstat provides because it's the only data that they have, so right off the bat we're dealing with uncertain numbers in reliability.

Sanctions are mostly a longer term solution, unfortunately these things simply take time, as there are many tricks that a country can use to keep their economy afloat in the short term but chip by chip it crumbles away over a longer period. Russia has definitely pulled a lot of tricks but this isn't sustainable in the long term. For a period as well, they didn't let anyone sell or exchange Russian currency and made them pay in roubles.

Thousands are now working for the government to oil the war machine but they will need to be replaced eventually from where they were taken from. Russia is in a war economy mode and as such are spending a lot on waging a war which inflates GDP in the short term. As stated in the article, higher oil prices and military spending do help support the economy in the short term as well and hide other areas of decline.

The Rouble was propped up by Russia pumping a bunch of cash into the system but the cash will run out. It could still not collapse for a while but they won't be able to hold out forever. Even a contraction of 2% is bad though, especially when they were projected to grow pre-war. In comparison, Russian GDP contracted 7.8% during the 2009 global economic crisis.

Plus it didn't help that the West weaned themselves off Russian oil gradually across the entire year so it slowed any impact to Russia's energy economy down, then China/India and others have also increased their buying of Russian oil but they'll come a point where China and India will take advantage of the situation Russia is in and get the oil for cheap, if not already.

Russia Swings to $29 Bln First-Quarter Budget Deficit | Reuters

But add on the brain drain, from the thousands who have fled the country and the thousands who will end up dead in Ukraine, to losing a huge chunk of a blue collar/middle class workforce, the impact of physical and mental disabilities that the war will have on Russians, paints an awful picture for Russia's long term prospects from a country which was already suffering unless you lived in a major city, the effects will last decades.

Also...

Russia’s Economy Is Starting to Come Undone - WSJ

The True Impact of a Year of War on Russia's Economy | DW Business Special - YouTube

Russia Forecasts $1.5Bln Shortage in Excess Oil and Gas Revenue - The Moscow Times

Last edited by Ryuu96 - on 07 April 2023