Experts believe Russia’s economy is already “in recession” and may “begin to collapse” as a result of the war with Ukraine, despite figures showing Moscow has managed to avoid Western sanctions against the country.
Six months into the war, CNN says, “Russia is engaged in a war of attrition that it didn’t expect, but is finding success on another front, after its oil-dependent economy plunged into a deep recession but proved very resilient.” It is more resistant. More than expected.”
But according to the report, Russia’s economy “started to deteriorate and is likely to face a long period of recession as a result of Western sanctions,” according to the report, Andrei Nechaev, Russia’s economy minister in the early 1990s, and other analysts said.
The report notes that the ruble fell to its lowest level earlier this year following an attack on the US dollar, before rebounding to its strongest level since 2018. Now it is reversed. .
Interest rates are now lower than before the war, and Russia’s central bank says inflation, which reached 18 percent in April, will fall to 12 to 15 percent for the full year.
The central bank revised its forecast for this year’s gross domestic product and it is now expected to fall between 4 and 6 percent, compared with expectations for a contraction of 8 to 10 percent and the International Monetary Fund now predicts. 6% contraction
Nechaev also notes that: “The exit of MasterCard, Visa, hardly affected domestic payments because the central bank had its own alternative payment system.”
Russia’s long-term stability depends on the energy sector, which is by far the largest source of government revenue. The International Energy Agency says Russia’s income from oil and gas sales to Europe doubled between March and July this year.
But what happens when Europe’s 90 percent embargo on Russian oil comes into effect in December will be “very critical” as an estimated two million barrels per day of Russian oil will be “forgotten” and while some of that In Asia, experts doubt whether demand will be high enough to absorb this amount.
Humayun Falkshali of the consulting firm Kpler argues that China cannot afford to buy much more Russian oil than it already has.
The price also plays a decisive role in whether Russia can continue to sell its oil at discounted prices to secure new markets.
And the former Minister of Economy of Russia notes that “a 30% discount from $120 per barrel is different from a discount of $70 per barrel.”
While global inflation helps Russia’s energy sector, it hurts the Russian people, who, like the rest of Europe, are suffering from a high-cost-of-living crisis exacerbated by the war.
“In terms of standard of living, if you measure it by real income, we’re going to go back about 10 years,” worries the former minister, who helped steer Russia into economic bankruptcy in the 1990s.
In turn, the Russian government has stepped up spending to address the problem, announcing a 10 percent increase in pensions and the minimum wage in May.
Sanctions on the tech industry and the aviation industry may have a long-term impact on the Russian economy, the report said. In June, U.S. Commerce Secretary Gina Raimondo said that global semiconductor exports to Russia had fallen 90 percent since the war began, disrupting production of nearly everything.
“The impact of the sanctions will be more of a slow burn than a quick hit … Russia now faces a potentially long period of stagnation,” said Chris Weaver, co-founder of Makro, which advises multinationals.
But the former minister clarified: economic recession has already started.
Source: Lebanon Debate
