Ukraine-News: Economists predict a dramatic slump in the Russian economy

Created: 05/25/2022, 08:32

By: Max Mueller

Since the start of the Ukraine war, Russia has not released any data on the economic situation.

New analyzes show that a massive slump could be imminent by the end of 2022.

Munich – The discussion about the question of whether and which weapons Germany should deliver to the Ukraine has completely overshadowed one aspect: how effective is the weapon that is already in use?

It is not without reason that economic sanctions are called “mort civile” in French – civil death.

They should hit the Russian economy.

The problem: Moscow has not published any data on the economic situation in Russia since the start of the Ukraine conflict at the end of February.

However, there is one indicator that cannot be hidden: imports.

Because how many goods and goods are delivered to Russia is not exclusively collected by Russia.

Ukraine-News: Economists forecast - Russia's GDP will fall by 30 percent by the end of the year

Robin Brooks, chief economist at the International Banking Federation, tweeted on Sunday (May 22) recent data he analyzed with researcher Jonathan Pingle.

was the first to report it.

His forecast: By the end of 2022, gross domestic product (GDP) in Russia will fall by 30 percent.

For comparison: In Germany, even a halving of the growth forecast caused long faces in the economy.

Can't imagine what a minus in front of the number, let alone a 30, would trigger in this country.

The study results are based on data on the exports of 20 of Russia's most important trading partners.

According to the Observatory of Economic Complexity, China and Germany have the best economic ties with President Vladimir Putin's country.

Russian ruble collapses

A miserable economic situation on the one hand and a strong currency on the other?

That doesn't add up.

In theory, the strength of a currency reflects the state of the economy.

But there is a simple explanation for the paradox: the Russian government is currently doing everything it can to tighten the money supply.

For example, capital controls have been introduced, making it difficult for citizens and businesses to sell their bonds or stocks.

This will stabilize the ruble exchange rate.

In addition, energy exports continue to contribute significantly to Russia's economic stability.

Russia is demanding a two-account model from “unfriendly,” mostly Western countries, allowing foreign exchange payments to be instantly converted into rubles.

The method stimulates ruble demand and thus supports the exchange rate.

Ukraine-News: Exports to Russia are falling massively - there is a lack of preliminary products

The fact that imports are falling should come as no surprise - after all, Russia does not have control over which countries deliver their goods there.

“In the case of imports, you can see a very significant drop as a result of the sanctions.

They have fallen by almost 50 percent since February," says Martin Eichler, chief economist at the economic research company BAK

.

It is difficult to say to what extent our own economy will be affected.

One thing is clear: the Russian economy is not in a position to produce autonomously.

One is dependent on foreign primary products for the production chains to function.

Despite a strong ruble, the Russian economy is on the brink of decline, economists say.

© Sven Hoppe/dpa

"The new export bans in Western countries and the delivery restrictions imposed by many companies are likely to hit Russian industry particularly hard," says the Bundesbank's monthly report published on Monday (May 25).

Russian exporters would have to look around for new sales markets and logistics options.

"All in all, the Russian industry is threatened with high efficiency losses and technological regression as a result of the extensive international isolation."

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Bundesbank: Russia is headed for “losing a significant part of its wealth”

The Bundesbank predicts a bleak future for the Russian economy.

Major losses are not only to be expected in the short term, but massive damage must also be expected in the longer term.

Existing structural problems are likely to worsen considerably: "All in all, Russia is heading towards losing a considerable part of its prosperity in the long term."

The government of Ukrainian President Volodymyr Zelenskyj has repeatedly called for tougher sanctions.

One of the demands is that the countries of the European Union should forego Russian gas and oil - one of Moscow's main sources of income.