Economist: Russia’s economy is doing well with sanctions so far
British magazine The Economist in their article titled “Wounded Bear.
In response to the Russian invasion of Ukraine, the West declared economic war on Russia, the Economist writes. The United States has banned the sale of a wide range of goods in Russia, one after the other travel companies left the country, and 60% of the Central Bank’s reserves stored abroad were accidentally frozen.
The idea was to tell Putin for the aggression by bringing down the Russian meeting. Within a week, the ruble fell against the dollar by a third, and the share prices of many Russian companies collapsed.
The Economist asks for sure: Is this Western strategy really working as it is supposed to?
The chaos in the Russian markets seems to have subsided, the magazine states. After falling in early March, the ruble has strengthened, and its rate is approaching the pre-war time. The main indicator of the financial market fell by a third, but it partially recovered losses.
The government and most companies pay their obligations in foreign currencies. The mass withdrawal of cash – almost 3 trillion rubles – has ended, and the population has returned most of the money to their account.
A series of measures taken helped to stabilize the markets. Some measures included, for example, raising the Central Bank’s rates from 9.5% to 20%, which encouraged the population to keep the media in ruble accounts.
Other entertainments are not so attractive, for example, they are involved in the delivery of 80% of exporters’ foreign exchange earnings.
Trading on the Moscow Stock Exchange, in the euphemism of the Central Bank, “negotiable.” Short selling is prohibited, and non-residents do not hold promotions until April 1. (The Moscow Exchange reported that on March 31, the prohibition to sell is charged for share clearing participants, however it is registered for brokers’ clients. – approx. BBC)
The real economy, the Economist continues, is in some ways a mirror image of the financial one: it is healthier than it seems at first glance.
Consumer prices have risen by more than 5 percent since the beginning of March alone. Many foreign firms left the market, stopping the supply of their goods, withdrew the ruble and withdrew the imports to rise in price.
But not everything went up in price. Vodka, mostly a Russian-made product, costs little more than the extraction. Gasoline – almost the same as before. Although it is argued that something is still early, there are few signs yet that economic activity is hit hard.
According to the OECD (Organization for Economic Cooperation and Development), which conducted a study based on data on the Internet, GDP for the quarter of March March was about 5% higher than a year ago.
Other data compiled by The Economist suggests that electricity and rail consumption is affordable at normal levels.
Sberbank’s spending analysis tools show that households are spending slightly more than they did a year ago.
This is partly because people are stocking up in anticipation of rising prices. Household appliances are especially actively bought up. But spending on services fell only slightly and was much more active than the prolonged pandemic.
Nevertheless, Russia appears to be entering a recession this year. Some predict a fall in GDP of 10-15% – depending on three factors.
The first is whether ordinary Russians should start worrying about the economy while the war is going on and, accordingly, start saving, cutting spending, as happened in 2014 when Russia annexed Crimea.
The second is whether production is stopped due to the ban, which blocked the access of Russian companies to Western imports. The Russian aviation sector is particularly vulnerable, as is the auto industry. But here we must take into account that many enterprises that were in charge back in Soviet times require experience in working without imports. If anyone’s economy, then it is the Russian economy.
The third and most important factor is the import of Russian energy carriers. Despite the verdict, Russia still sells $10 billion worth of foreign oil a month. This is a quarter of pre-war exports. Revenues from the sale of gas and oil products are also received.
It is an important source of foreign currency that can be bought in neutral and foreign countries. And until this changes, the Russian economy can still hold out for some time, the Economist concludes.