Russia’s Economy is Being Slowly Asphyxiated

According to experts, Russia faces a financially turbulent 2023 as Western sanctions imposed after Vladimir Putin’s invasion of Ukraine continue to bite.

Reuters reported on Friday that a forecast among 15 analysts predicted that Russia’s economy would shrink by another 2.5 percent next year in a contraction that is expected to be less sudden, but more prolonged, than initially predicted.

Soon after the invasion of Ukraine on February 24, forecasters said that Russia’s GDP in 2022 could fall by up to 15 percent. However, analysts polled by Reuters stated that the figure is likely to stand at closer to three percent, suggesting that the Russian economy was more resilient than initially thought.

Moscow currency exchange
A teller is seen inside the exchange office of a bank on November 8, 2022, in Moscow, Russia. Analysts said the sanctions will hit Russia’s economy hard in 2023 because of the country’s invasion of Ukraine.
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But in Moscow on Friday, the chief economist of Russia’s private Alfa-Bank, Natalia Orlova, said that even if the decline “is not as big as we all thought at first, it does not mean that we can go to next year peacefully.”

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“We cannot exclude a deeper contraction next year when compared to 2022, it could be 5-6%,” he said, according to Reuters.

The poll of analysts also found that inflation is expected to accelerate to 12.1 percent, from 8.4 percent in 2021.

Since Putin’s February 24 invasion, Russia’s economy has been hit by sanctions imposed by the European Union, the United States and other Western allies to curb Moscow’s ability to finance its war machine.

Western countries have frozen Russia’s access to some of its foreign reserves and kicked it out of the SWIFT global banking system, while the US Treasury said it would limit investors from buying Russian debt.

While Russia still benefits from high oil and gas prices, a move by the G7 countries to take effect on Monday will see Western allies cap a barrel of oil in Russian waters at $60.

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“Sanctions already in place that limit Russia’s access to major technological contributions to the energy sector on which it relies will likely have an even deeper impact on profitability,” said Abby Schrader, professor of history at Franklin & Marshall College. Russia’s fiscal. , Pennsylvania.

These sanctions combined with the oil price cap and Russia’s currency reserves are shrinking “could paralyze the Russian economy,” he said. Newsweek.

In a blog post for the Wilson Center think tank last month, Boris Grozovski wrote that Putin’s partial mobilization of troops “has done to the Russian economy what Western sanctions have so far failed to do.”

Hundreds of thousands of Russian men fled the country and in addition to declining demand for products, many businesses now face a lack of experienced employees.

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He noted that the draft was linked to a “apparent decline” in the real estate market, the demand for credit as well as consumer sentiment.

The knock-on effects include an increase in bad loans and a decline in demand for things like restaurants and other services.

Non-oil and gas budget revenues for Russia’s coffers were 20 percent lower in October 2022 than a year earlier, and the decline in revenues will force the government to raise taxes, cut non-war spending, and incur debt, it was say

“The population began to suspect that Putin’s military adventure is taking place at their expense,” Grozovski wrote.

Dave Gulley, professor of economics at Bentley University, Massachusetts, said that the sanctions on energy and technology and curbing Russia’s ability to move and access funds around the world had “a material impact on the Russian economy.”

“Combined, they have a serious impact that will likely increase over time if they are maintained and implemented,” he said. Newsweek. “Aside from the sanctions, the internal costs are very significant. For example, tens of thousands of highly qualified Russians left the country.”

Newsweek contacted the Kremlin for comment.

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