Making a mockery of all the doomsday scenarios of Russia buckling under the multinational barrage of sanctions, financial handcuffs and trade bans, Russia’s economy is doing just fine - in fact, better than erstwhile EU stalwarts like Germany and the UK!
’ The performance of the economy is now in line with its pre-invasion trend; GDP grew in real terms by more than 3% last year. Unemployment remains at a record low. And there is little evidence of corporate distress; indeed, the rate of business closures recently hit an eight-year low. The Moscow Exchange is hoping to see more than 20 initial public offerings this year, up from nine last year. The latest “real-time” data on economic activity are reasonably strong. Consensus forecasts for GDP growth this year of 1.7% look too pessimistic.’
Oil keeps the Russian economy afloat
’ In spite of the sanctions, Russia remains one of world’s largest oil exporter, and benefits from Saudi Arabia’s last year’s decision to cut down on crude oil exports. Until then, the kingdom was the world’s first oil exporter.
“At the current price - just over $80 for Brent - the budget earns enough money from oil taxes to fund both the military industrial complex, social spending and other budget items with a deficit of less than 1% of GDP,” explained Christopher Weafer, CEO of Eurasia-based advisory firm Macro-Advisory.
“It is comfortably affordable from accumulated financial reserves. This oil revenue is critical as the ‘swing factor’.” Weafer emphasised that the devaluation of 20% of the ruble against the US dollar that occurred last year boosted export revenue for Russia - as oil exports are referenced to the US currency, regardless of the currency used in the transaction.’
Russia has recorded robust growth since the economic contraction of 2022, surpassing many expert forecasts.
Rosstat, Russia’s national statistics agency, reported a growth rate of 3.6 percent for the Russian economy in 2023 while the International Monetary Fund (IMF) estimated growth at around 3 percent. The IMF has thus revised its forecast for 2024 upward to 2.6 percent given the Russian economy’s strong performance last year.
“It’s interesting to note that Russia’s growth surpassed even the most optimistic forecasts, including those of its own institutions,” said Igor Delanoë, deputy director of the Franco-Russian Observatory.’