The Economist: Russia’s economy far better than expected amid Western sanctions

RT – The Russian economy is feeling much better than expected amid the unprecedented imposition of sanctions by the West, according to a report published on Wednesday by The Economist.

Although Western countries actually launched an “economic war” against Russia after the start of Moscow’s military operation in Ukraine, the “chaos in Russian markets” due to such measures “appear to have subsided,” the British weekly reported. The ruble has depreciated sharply, but is now close to its level before February 24, while shares of Russian companies, which in some cases lost a third of their value, are also recovering.

As for the real economy, it is “more healthy than it appears at first glance,” as The Economist points out. The weekly measure of consumer prices shows that they have risen more than 5% since the beginning of March, but not all goods have risen. In particular, vodka, which is mainly produced in the country, costs a little more than before the military operation, while gasoline costs about the same.

Thus, the magazine concludes that there is as yet little evidence that Russian economic activity has been significantly affected.

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How did Russia manage to stay afloat?

To stabilize the economy after the imposition of sanctions, the Russian government took a series of measures. At the end of February, the Russian Central Bank raised the base interest rate from 9.5% to 20% in order to ensure financial and price stability in the country, as well as protect the savings of Russian citizens.

In addition, the Eurasian state government decreed that exporters must convert 80% of their foreign exchange earnings into rubles. As for trading on the Moscow Stock Exchange, short selling was prohibited and non-residents were temporarily prohibited from selling shares. In addition, the Central Bank of Russia introduced a 30% commission to individuals who buy foreign currency through intermediaries, but later reduced it to 12%.

Will Russia enter a recession?

However, some experts believe that Russia may enter a recession this year, although the level of decline in the economy depends on three factors. First, the fact that ordinary Russians, as the conflict continues, will begin to worry about the economy and make significant cuts in their spending will have an impact on the situation.

Another question is whether production will eventually stop as Russian companies lose access to Western imports due to sanctions. However, many large companies created in the Soviet era are accustomed to working without imports. The article stresses, “If there is one economy in the world that can meet the challenges of isolation and lockdown, it is Russia.”

Another important factor concerns energy exports from Russia. Despite numerous sanctions, Russia continues to supply oil and gas to foreign buyers, which represent a valuable source of foreign currency for purchasing consumer goods and essential parts, according to The Economist.

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