Did the Russian Economy Reach Rock Bottom Six Months into the War?

Did the Russian Economy Reach Rock Bottom Six Months into the War?

Russia’s forecasts for 2022 are better than expected. But official inflation frequently outpaces price growth.

There are fewer and fewer official statistics, making it harder and harder to evaluate the status of the Russian economy. Russia’s government hasn’t released any trade figures since April 2022. The customs department and the central bank no longer disclose information on exports, imports, the composition of capital outflows, and the balance of payments. The Eurasian Economic Union (EAEU) no longer provides access to its international trade statistics. With rising oil export prices reducing the impact of Western sanctions, Russia’s economy has avoided the collapse many expected after Moscow launched its forces into Ukraine six months ago. However, difficulties are beginning to emerge for ordinary Russians.

The structure of Russia’s foreign reserves is no longer published by the central bank. Only their total values, without asset details, have been updated since the end of March. Additionally, the government has permitted Russian businesses to delay data publication until the end of 2022. The central bank initially allowed banks to withhold their primary financial reporting, and eventually let all financial institutions (including non-state pension funds and insurance businesses) maintain the confidentiality of management and audit information. The Russian aviation agency ceased releasing passenger traffic statistics in March. To “prevent inaccurate estimates, conjecture, and discrepancies” and “to protect enterprises and specific persons from fines,” according to the stated justification. The real goal is, of course, to conceal factual facts concerning the worsening state of Russia’s economy. Data for January through June 2022 have been released by the Russian Statistical Agency. Comparing June 2022 to June 2021, industrial production increased by 98.2 percent while transportation turnover decreased by 5.8 percent. Nearly 10% less retail sales were conducted. There was 15.9 percent inflation. In comparison to the first half of 2021, the population’s real incomes dropped by 0.8% 2022. Even though the Russian economy has contracted or, as some Russian officials claim, entered a phase of “negative growth,” these numbers are hardly disastrous. By the end of April 2022, this had already taken place, which can only be explained by the imposition of a comprehensive set of Western economic sanctions in February and March. Before that, the Russian economy was expanding steadily following the Covid-19 pandemic’s economic collapse. Therefore, it is apparent that Russia’s economic problem has been brought on by the Western-imposed sanctions. However, depending on the industry, the situation differs greatly. After a modest dip in April, the main export sector of mining (oil, natural gas, coal, etc.) started to increase once more in May and June. Due to high gas and oil prices on international markets as well as stalled sanctions in this industry, this has happened. Only at the end of 2022 will the EU oil embargo (with a few exceptions) take effect. Russia’s gas is still subject to sanctions, and Europe only ceased purchasing Russian coal on August 10. According to official data, manufacturing businesses that rely on capital like imported parts and machinery have experienced a significant decline. The rouble has since risen more than 25% this year with the aid of emergency capital controls, becoming the best-performing currency globally so far in 2022. This has assisted in taming inflation and putting an end to the panic buying that followed the imposition of sanctions by Western nations. While consumer products like Guinness beer, Zara clothing, and Nespresso coffee capsules have vanished from store shelves as a result of sanctions, several Russians told Reuters they were also having trouble finding necessities like essential medicines. Retail sales fell 11% quarter over quarter after the harsh inflation shock in March, consumer confidence plummeted, and monetary conditions tightened. These factors have all contributed to a dramatic decline in consumer demand. Living standards may still decline, according to the online initiative Pricing.day, which monitors consumer goods pricing, which stated: “The economy has crumbled and shortages of even essential supplies are on the horizon.” But for many Russians, little has changed in the past six months; they continue to travel abroad, purchase Western goods, lament the high cost of living, watch TV, and back Putin. State coffers should continue to swell as energy prices are predicted to stay high even as countries in the European Union attempt to wean themselves off of Russian gas and oil. Russia has declared its intention to resume its practice of adding to reserves with extra oil earnings.

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