Russian analyst: Moscow succeeded in avoiding the expected collapse

The war cost the Russian economy a 10-year decline

• Stopping the war in Ukraine is a precondition before starting to talk about the improvement of the Russian economy.

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• Putin is trying to create a state of Russian self-sufficiency in all sectors.

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Although it has been nine months since the start of Russia's war against Ukraine, the Russian economy is doing better than expected.

The predicted collapse was avoided, and the expected 8-10% decline in GDP was confined to the 3-4% range, says Russian analyst Alexandra Prokopenko.

Prokopenko, a Moscow University graduate who holds a master's degree in sociology from the University of Manchester, adds in a report published on the Carnegie Endowment for International Peace website that, before the war, it was expected that the growth rate would reach 3%, but the economy is not expected to recover. Except in 2024, at best, and also if external factors don't get too bad, which is likely.

It seems that Russia will witness another lost decade, after witnessing a decade of stagnation, followed by another decade of decline.

Prokopenko, who previously worked for the Russian Central Bank, explains that the Russian government and the central bank have mitigated the economic blow from the war against Ukraine and the sanctions that followed, in particular through conservative fiscal policies in recent years, such as achieving a permanent budget balance with the price of oil. It is $45 a barrel, and expenditures are kept to a minimum, at the expense of economic growth.

Necessary preparations

In addition, preparations have been made to counter sanctions.

State companies and banks have conducted stress tests, including scenarios in which Russia is excluded from the global financial system SWIFT, which allows for the smooth and rapid movement of funds across borders, and the West stops supplying it with certain technologies, although other measures were not taken into account, such as freezing reserves. gold and currency.

Given the traditional reluctance to report problems, reports to the Russian authorities have been quite optimistic.

The most serious penalty expected was a ban on IT chips, something that has no direct impact on most sectors.

Thanks to these preparations, the impact of the sanctions proved weaker than expected in the short term, but also did not last long, but the budget, which flourished in the first few months thanks to oil and gas revenues, began to shrink, and other revenues fell by 20% in October, on the basis of Annually, almost all of the growth in oil and gas revenues was due to the increase in the mineral extraction tax imposed on Gazprom.

stagnation continues

Russia's economic stagnation is likely to continue, as its industry - and even the military sector - relies heavily on imports of high-tech goods, mostly from the West.

In general, technology imports decreased from all countries, except for Turkey.

A collapse in those imports would reduce production and make it more primitive, which is already happening.

There are major difficulties resulting from the reorientation of Russian production towards new markets, which have limited links with Russia in terms of transportation.

Supplies of non-sanctioned goods, even to friendly countries, are being hampered by the refusal of international tanker shippers to do business with Russia.

The problems are not limited to sending goods, but also to paying or receiving their price. Transactions in euros or dollars can be blocked or take a long time.

concessions pressure

Russia is also facing the pressure of having to make concessions or discounts on its goods to those who are still willing to buy them.

It needs those markets more than it needs Russia.

The state could not help Russian companies with systematic solutions, most of which are finding their own way to adapt to new conditions.

Prokopenko points out that the potential of the Russian economy before the war was not very great, with a growth rate of 2-3%.

War and external constraints brought it down to about 1%.

At present, it will take three to five years for the economy to develop to halt the decline.

Prokopenko concluded her report by saying that the Russian government, and President Vladimir Putin, like to repeat that Russia already has everything it needs for development, but any shift towards growth based on internal resources will require ending the war in Ukraine, promoting competition, criminalizing economic excesses, and providing guarantees effective intellectual property rights.

• Possibly continued economic stagnation in Russia, as its industry - and even the military sector - relies heavily on imports of high-tech goods, mostly from the West.

• The 8-10% decline in Russia's post-war GDP that was expected has been confined to the 3-4% range.

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