Russia no longer fears western sanctions, but its economy remains pressured

Russia's stance on Western sanctions has shifted, with a Kremlin spokesperson asserting that the country is no longer afraid of further measures. However, the impact of these embargoes is still evident, as exports decline and the ruble weakens. Despite this, Russia's economy displays signs of resilience, with growth holding steady and total wealth increasing in 2022.

The International Monetary Fund (IMF) predicts that Russia's gross domestic product (GDP) will expand by 2.2% this year, surpassing its previous estimate of 1.5%. The IMF attributes this growth to substantial fiscal stimulus packages implemented by the Russian government. Additionally, Russia's military spending has increased significantly, with a $160 billion budget allocated for this year and a 25% increase planned for 2024.

Furthermore, the UBS Global Wealth Report reveals that Russia's total wealth grew by $600 billion in 2022, despite sanctions targeting high-net-worth individuals. The number of millionaires in the country also rose by 56,000 to reach 480,000.

However, these positive indicators do not negate the impact of sanctions on Russia's economy. Western efforts to undermine Putin's war machine have targeted the country's oil and gas revenues, resulting in a significant decline in Russia's current-account surplus and energy revenues. The current-account surplus dropped by almost 80% during the first nine months of 2023 compared to the previous year, while energy revenues decreased by 41% year-on-year.

The devaluation of the ruble against the US dollar is another manifestation of economic weakness. Despite the Bank of Russia's efforts to stabilize the currency by raising interest rates, the ruble has depreciated by 10% since Vladimir Putin's invasion of Ukraine.

Additionally, the ongoing war has led to record worker shortages in Russia, as a considerable portion of the population has been either conscripted or chosen to emigrate.

In summary, while Russia may express reasons for economic optimism, the impact of sanctions and the costly war cannot be dismissed. The country's economy continues to face challenges, including declining exports, a weakened currency, and labor shortages.


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