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Russia’s ongoing onslaught on Ukraine has continued for more than a month with no signs of a ceasefire. Economists predicted that the burgeoning Russian economy would witness a terrible crash under the weight of the heavy sanctions imposed by the West.
More than 600 international companies have exited Russian markets. Nearly 155 enterprises have resisted calls to withdraw or curtail Russian operations, while another 96 are deferring new investments or trying to buy time.
The World Bank predicted an 11.2 % drop in Russia’s GDP in 2022 due to harsh financial sanctions implemented by the US and its allies.
Despite the predictions and assumptions, Russia seems to have prevailed over the highs of inflation and the ruble's loss of value. The ruble has returned to its pre-war level.
The Russian central bank has cut interest rates for the second time in a month. The government and most firms have kept up with their payments on foreign-currency bonds.
The real GDP has stabilized at 4%, which was a pre-COVID figure. Inflation however hit 17.3% in March, the highest level since 2002, reported Rosstat, the state’s economic statistic agency, reported Fortune.
The main benchmark of Russian stocks plunged by a third but has since stabilized. Russians have returned most of the cash withdrawn from banks, in the early days of the war, to their accounts. Nearly $31 billion (3 trillion rubles) was withdrawn from banks at the beginning of the war due to the panic created by surmounting Western sanctions.
Russia’s prized jewel, that has sustained its economy, is its oil industry. While Europe has applauded itself for aiding Ukraine in its war and providing shelter to nearly 5.5 million refugees, it has paid Russia nearly $42.09 billion (€40 billion) for energy, since the war, as reported The Economist.
While the EU has agreed to ban Russian coal by August and is discussing sanctions on oil, there’s been no consensus among the 27 nations so far about halting oil and natural gas.
Russia is bound to enter a recession this year but its impact depends on whether ordinary Russians reduce spending as consumer prices rise. The other factors include a halt on production due to Western sanctions and the magnitude of Russia’s fossil-fuel exports. As long as these three factors remain in check, Russia is less likely to feel the heat of an impending recession.
Source - The Economist and Fortune
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