What really happened to the Russian economy in 2022?
While many analysts and observers expected the Russian economy to collapse under the weight of the Ukraine war and a spate of Western sanctions, the country looks surprisingly resilient through 2022.
The head of the Central Bank of Russia said in December that Russian GDP would contract by only 3% in 2022, while President Vladimir Putin foretold a drop of 2.5%.
“The Russian economy has survived 2022,” economist Janis Kluge from the German Institute for International and Security Affairs (SWP) told The Moscow Times.
“But we still can’t say that it survived the sanctions because they are still unfolding.”
Economists like Kluge warn that behind the seemingly positive year-end statistics lie numerous signs of darker times ahead.
And even the GDP figures are not as rosy as they might seem.
The inclusion of sanctions-free January and February in the GDP figures creates a misleading picture of Russia’s actual economic losses, with economists pointing out that Russia’s war-related economic losses are significantly higher because, before the invasion, the economy was expected to grow around 3%
Even a 3% contraction is a “colossal recession given that every economy in the world was expected to grow 3-4% after the coronavirus pandemic,” economist Oleg Itskhoki said in a recent report. youtube stream Presented by Russian journalist Yevgenia Albats.
According to Kluge, before the war, Russia’s economy was expected to grow by as much as 4% between February and December. Instead, it has declined 6% in that time.
This means that Western sanctions “basically reduced Russia’s economy by 10%,” he said.
By comparison, Russian GDP contracted by 7.8% during the 2009 global economic crisis.
Despite the huge economic losses, experts disagree on how Russia managed to avoid an even bigger economic contraction.
Many doomsday predictions for Russia’s economy were based on assumptions that the country would face a banking crisis, according to economists. interviewed by the media Meduza. However, no banking crisis arose.
The Russian economy has also been boosted by record revenues from energy experts as prices for raw materials, including oil and gas, have skyrocketed in the aftermath of the invasion.
Russia raked in about $158 billion in energy exports in the first six months of the invasion of Ukraine, according to to the Finland-based Center for Research on Energy and Clean Air.
In March and April, Russia even place New oil and gas revenue records.
But the West is increasingly focused on cutting off this lifeline for Russia, and the European Union last month banned maritime deliveries of Russian crude and capped the price of oil.
Russia’s seaborne oil exports fell 22% in December after the embargo was introduced, according to figures from commodity data firm Kpler. aforementioned by The Wall Street Journal.
“Russia is heading into the new year without this big cushion, without the European market for gas exports, with much lower oil prices and lower oil export volumes,” Kruge said.
“This is going to be a big problem.”
Falling oil and gas exports are expected to weaken Russia’s currency, and the ruble has lost 13% against the US dollar since the imposition of the price cap.
This trend is likely to continue, according to Kruge.
“The ruble will weaken and cause even more inflation in Russia. This is also becoming a political problem,” said the SWP economist.
Annual inflation in Russia last year is expected to reach 12%.
Other consequences of the war, including the exodus of more than 1,000 Foreign companies and Western sanctions on exports to Russia are also likely to have a more gradual impact.
“Many companies will lose access to Western technology, software and machinery,” said economist Kruge. “This is like a very slow erosion of productivity.”
However, different sectors of the Russian economy have fared very differently, with some suffering particularly badly, while others have prospered.
One of the worst has been car manufacturing, with Russian car sales place to end 2022 at 660,000 units, a 60% year-over-year decrease.
On the other hand, 2022 was a successful year for agriculture, which is expected to record overall growth of at least 4%.
Russia’s agricultural sector in 2022 will be “the brightest spot in the rotten Russian economy,” said Andrey Sizov, managing director of SovEcon, an agricultural research firm focused on the Black Sea region.
The excellent result for Russian farmers was aided by near-perfect weather conditions, but Sizov cautioned that 2022 is likely to be an exception.
“For three to five years we will see stagnation in the agricultural sector and possibly even a drop in production unless something changes,” Sizov told The Moscow Times.
This slow and steady decline over the next few years looks set to be replicated to varying degrees throughout the Russian economy.
Economist Itskhoki said that the Russian economy will contract by up to 5% in 2023, while others believe that the contraction will be even greater.
Alfa Bank’s chief economist, Natalia Orlova, has said which will contract 6.5% due to the fall in consumer demand, lower investment and the loss of export potential.
But political uncertainty and the unpredictability of military events in Ukraine mean that any prediction could change at any time. .
“The economy is unlikely to be the main source of news in 2023,” Itskhoki said earlier this month.
“It’s hard to imagine that the war could last another 10 months and not cause a cataclysm.”