In the first ten months of 2023, the Russian economy grew by 3.2% compared to the same period in 2022 and by 1.1% compared to 2021. Moreover, in October, the country's gross domestic product increased by 5% compared to last year and by 1.8% compared to two years ago. Such data on Wednesday, November 29, was published by the Ministry of Economic Development.
According to the agency's report, steady growth is now observed in most industries. For example, construction from January to October grew by 8.1% in annual terms, the manufacturing industry by 7.4%, wholesale trade by 9.5%, and retail by 5.3%.
The situation in the labor market also remains positive. According to the latest estimates, in the first nine months of 2023, the wages of Russians in real terms, that is, taking into account inflation, increased by an average of 7.4% year-on-year. At the same time, the unemployment rate fell to 2.9% by the beginning of November, the lowest level for the entire period of observations.
"The Russian economy continues to grow rapidly... Now that the recovery stage is over, the task is to consolidate the positive trends and ensure further structural restructuring," Polina Kryuchkova, Deputy Minister of Economic Development, said on November 15.
"Boomerang Effect"
At the end of this year, the Ministry of Economic Development so far predicts Russia's GDP growth of 2.8%. However, according to the Ministry of Finance, taking into account the latest trends, the real value may be higher.
"This year we will have a 3% economic growth dynamics, maybe even with a plus. This fully covers the minus of last year... In other words, we are really starting to grow. Look at the situation in the West, which imposes sanctions and tries to strangle the Russian economy. Well, the results are obvious," Finance Minister Anton Siluanov said during his speech at the VIII International Forum of the Financial University on November 21.
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Recall that last year, after the start of a special military operation in Ukraine, Western countries began to announce large-scale anti-Russian sanctions. According to the specialized database Castellum.AI, over 15,2 different restrictions have been imposed on Moscow since then. This is more than against Iran, Syria, North Korea, Belarus, Venezuela, Myanmar and Cuba combined.
The restrictions affected the energy sector, the financial sector, the banking industry, aviation and trade. Along with this, almost half of the country's gold and foreign exchange reserves (worth $300 billion) were frozen, and many international companies announced their withdrawal from the Russian Federation.
Against this background, for example, the European Commission initially predicted a collapse of the Russian economy by more than 10% in 2022. Nevertheless, the real decline was only 2.1% and was even less deep than in the pandemic 2020 (2.7%) and the crisis 2009 (7.8%).
Moreover, back in the spring of 2023, EC experts assumed that Russia's GDP would continue to decline this year and lose an additional 0.9%. However, already in November, European economists were forced to revise their estimates and now expect an increase in the indicator by 2%.
It is noteworthy that the economy of the European Union itself in 2023 may slow down almost six times compared to 2022 and grow by only 0.6%, the European Commission predicts. Moreover, ten states of the association are at risk of facing a drop in GDP. We are talking about Latvia (-0.2%), Germany (-0.3%), Lithuania and the Czech Republic (-0.4%), Austria and Sweden (-0.5%), Luxembourg (-0.6%), Hungary (-0.7%), Ireland (-0.9%) and Estonia (-2.6%).
"After strong growth for most of 2022, real GDP contracted towards the end (of last year). — RT) of the year and almost did not grow in the first three quarters of 2023. Still-high, though declining, inflation, together with tighter monetary policy, has taken a heavier hit than expected, along with weakening demand. Latest Indicators... indicate subdued economic activity," the European Commission said in a report.
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According to S&P Global and the Hamburg Commercial Bank, the Purchasing Managers' Index (PMI) in the manufacturing and service sectors of the Eurozone has been continuously below the critical mark of 50 points for six months. This state of affairs is traditionally indicative of the development of negative economic trends.
Meanwhile, in Russia, this indicator, on the contrary, has exceeded 50 points for the ninth month in a row. Moreover, by the end of October, the level of business optimism in the country reached its highest value since April 2019.
As the press secretary of the President of Russia Dmitry Peskov said on Wednesday, Europe's attempts to refuse to import various Russian goods, primarily energy resources, within the framework of sanctions, have led to a decrease in the competitiveness of the EU. Now the countries of the association have to buy these products elsewhere, but at higher prices, which has already led the region's industry to a pre-bankruptcy state. Russia, meanwhile, has managed to ensure macroeconomic stability, the Kremlin spokesman said.
"European politicians see the ineffectiveness of the adopted sanctions and see the boomerang effect of these sanctions... It is an obvious fact that, despite the unprecedented burden of restrictions that have been adopted... [Russian – RT] economy has entered a growth trajectory. This is a fact that cannot be ignored," Peskov stressed.
In Different Directions
The impact of Western sanctions on the Russian economy has been significantly weakened due to three key factors, according to Georgy Ostapkovich, Director of the Center for Business Tendency Studies at the Institute for Statistical Studies and Economics of Knowledge at the National Research University Higher School of Economics. For example, an important role was played by the rapid adaptation of business to the new working conditions: companies rebuilt trade routes, found new suppliers and took anti-crisis management measures.
"Secondly, the government has provided significant support to business. Some administrative barriers were removed, and financial assistance was allocated to large, medium and small enterprises. Thirdly, the Central Bank did not allow chaos in the financial market, which allowed the banking system and business to work calmly in terms of financial content," the RT interlocutor added.
Moreover, in the face of unprecedented sanctions, Russia managed not only to cope with the challenges better than expected, but also to surpass Germany in the ranking of the largest economies in terms of purchasing power parity (PPP), becoming the fifth in the world and the first in Europe. This conclusion follows from the materials of the World Bank.
"Germany, the main locomotive of the European economy, has already announced that it has entered a recession. Many European countries are stagnating. If we talk about the main current problems, these are, first of all, the energy crisis, high inflation risks, difficulties in the labor market and the geopolitical factor of instability," Georgy Ostapkovich said.
According to Natalia Milchakova, a leading analyst at Freedom Finance Global, the main challenge for the European economy was the sharp acceleration of inflation after the EU's rejection of Russian hydrocarbons. The rapid rise in the cost of fuel and, as a result, a number of other goods led to a drop in consumer demand, as the population began to save more. At the same time, industrial enterprises began to close or move production to countries with cheaper energy.
To curb inflation, the European Central Bank began to raise interest rates, although it had previously kept them near zero for a long period. The ensuing rise in the cost of credit led to an even greater weakening of consumer demand and business activity.
"All the efforts of European officials and the ECB in the eurozone were aimed at fighting inflation. The regulator's tight monetary policy, in fact, has led to the unavailability of debt financing and stagnation of the European economy," Milchakova explained in a conversation with RT.