According to the latest statistics from Russia's State Statistics Service, international sanctions in the past two years have failed to stop Russia's economic development and returned to pre-war levels earlier this year, according to the latest statistics from Russia's State Statistics Service. Even Western news agencies and analysts now admit it. Vladimir Putin is declaring that Russia is not a "gas station", while Russian economic adviser Maxim Orayshenko insists that European sanctions against Moscow have cost Europe more than Russia.
But not all went well;With the surge in Russian military production, millions of Russians are contributing to Russia's inflation rate of 75% to pay the price.
Since the Russia-Ukraine war, Western sanctions have pushed Russia into recession following the invasion of Ukraine in February 2022, but the economy has been, at least by some indicators, with the recession ending after just 10 months. According to the Center for Macroeconomic Analysis and Short-term **, while "Sanctions and Modernization" may not be the most objective think tank (its director Dmitry Belousov is the brother of First Deputy Prime Minister Andrei Belousov), Russia's GDP grew by 5 in the third quarter of 20235%, an increase of 32%。In 2023, Russia's GDP increased by 11%, and this is the period before the full-scale invasion of Ukraine and the so-called severe sanctions of the West.
At present, Russia's economic performance is surpassing that of its Ministry of Economic Development and the Bank of China, when they said that the annual GDP growth rate would not exceed 2%. Now even analysts at Bloomberg Economics say that growth in 2023 will exceed 3%. According to the latest statistics from Russia's State Statistics Service, international sanctions failed to prevent the Russian economy from returning to pre-war levels earlier this year.
Currently, Russia through the National Wealth ** (the Ministry of Finance currently estimates its liquidity at 694 trillion rubles, which is equivalent to 46%) and ** loans to finance its deficit spending. By November 1, the total amount of soft loans had reached 11 trillion rubles - 7% of GDP and more than 14% of the credit portfolio of Russian banks. Large state-owned enterprises, including Russian Railways, the Volga Automobile Plant, Aeroflot and the Russian Federal Space Agency, have begun lobbying** to offer preferential terms for loans.
The head of the Central Bank of Russia, Elvira Nabiulina, warned that it is fueling inflation by subsidizing more and more borrowing, which is forcing the central bank to maintain high interest rates. In November, the annual inflation rate reached 75%, showing no signs of slowing down. And it is Russia's economic growth that is slowing down. According to the Central Bank of Russia, the economic recovery peaked in the third quarter of 2023.
However, as Stanislav Murashkov, an analyst at Raiffeisen Bank, said, the first problem facing the Russian economy is the shortage of human resources, which will also limit the development of the Russian manufacturing sector, and in addition, a further increase in the key interest rate will slow down wage growth and complicate the work of upgrading the technology of enterprises. At the same time, as the Russian economy approaches full employment, labor will be redistributed across industries, driving workers from industries affected by rising interest rates, such as construction, retail, and finance, to businesses in the Russian military-industrial complex, according to Alexander Isakov, chief economist at Bloomberg Economics. Future interest rate hikes will reduce borrowing and, in turn, consumer demand, putting Russia into another recession in the next six months with a risk of more than 70%.
According to reports, more than 85% of Russian companies are currently experiencing staff shortages, with skilled workers being the most scarce. In the first nine months of 2023, although nominal wages increased by 132%, and the unemployment rate fell to 29% (the lowest level in the post-Soviet space), but these impressive statistics mask significant problems in labor productivity. Compared to 2021, labor productivity decreased by 36%, the largest decline since 2009. The Russian labor market has lost about a million more workers due to the exodus of skilled workers fleeing the war and political repression, coupled with the participation and death of hundreds of thousands of people.
While the invasion of Ukraine remains a top priority, there will be a relative reduction in funding for the development of Russia's human capital, such as education and health care. The longer this continues, the harder it will be for the Kremlin to turn back and solve complex livelihood problems, and the easier it will be for the war to drag on.