As of: March 6, 2024, 5:13 a.m
By: Lars-Eric Nievelstein
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Despite sanctions, Russia is experiencing a significant economic boom – supposedly.
Is it actually only the war industry that is responsible?
What's behind the economic miracle.
Moscow – The war in Ukraine has been raging for more than two years.
Western industrial nations had already implemented sanctions after the invasion of Crimea, but tightened them in 2022.
The ulterior motive of the sanctions: a long-term weakening of the Russian economy.
Two years later, Russia released economic data that amazed Western experts.
Growth in Russia – False Statistics or Truth?
The Russian economy is expected to grow by 3.6 percent in 2023.
The Russian statistics office published corresponding figures in mid-February.
Economists early on showed a healthy distrust of these figures - after all, it is in Russia's interest to present itself strongly to the West - but there were also voices that at least partially supported the Russian representation.
“We see no evidence of manipulation,”
Spiegel
quoted Benoit Bellone from QuantCube as saying.
Among other things, the company analyzes satellite images to examine activities at ports and in industrial areas and to draw conclusions about economic performance.
Russia’s economic miracle – not a fake after all?
© IMAGO / ZUMA Wire
Julie Kozack, communications director at the International Monetary Fund, offers an explanation: “It’s a war economy.”
The high proportion of military spending supports production, while at the same time social transfers boost consumption.
The Finnish “Bank of Finland Institute for Emerging Economies” (BOFIT) already agreed with this in an autumn analysis, but noted how difficult it was to collect reliable data.
“As our contact with our Russian colleagues and analysts is limited, we have to rely more and more on official statistics,” the institute said.
Instead, it tried mirror statistics.
Russia is building a military complex
This refers to trade data from Russia's economic partners, which in turn is intended to provide information about actual exports and imports.
“The war makes the trading environment more difficult,” judged BOFIT.
The role of the military complex continues to grow, while the private sector suffers.
“Imports are declining, competition is withering and the economy is increasingly isolating itself from the rest of the world.” Even with this surprising economic growth, further development looks rather poor.
BOFIT economist Heli Simona specifically named two strands of the Russian economy, each moving in different directions.
All sectors that somehow benefit the war economy are growing, including electronics manufacturing, metal processing, computer manufacturing and vehicle construction.
Sectors remote from the war, on the other hand, would either grow significantly weaker or not grow at all.
Trade and services, for example, have not yet returned to their pre-crisis levels.
The motor vehicle industry and Russia's wood processing sector have been hit particularly hard since 2020.
This development has various effects in everyday life.
For example, a large proportion of the cars registered in Russia now come from China, and the production of household appliances has also collapsed.
Figures from BOFIT and the Russian statistics office show that war-related manufacturing has been increasing steadily since 2018 and that other manufacturing industries have been left far behind.
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Higher wages and a shortage of skilled workers
A second factor driving Russia's higher growth is private consumption.
Social benefits from the government are only one side of the coin, because higher wages are also driving Russians' spending habits, which in turn helps parts of the industry.
One reason for this is said to be the massive shortage of skilled workers.
“The age pyramid, the mobilization and the exodus of people leaving Russia mean that for five years we will be trying to achieve economic growth with a declining workforce,” said Moscow State University economist Natalia Zubarevich told
Reuters
.
After almost two years of sanctions, many economists agree on one thing: Russia's war machine is the drip that keeps the economy going.
“Russia’s economic performance shows that the regime urgently needs the invasion,” said Laura Solanko, senior advisor at BOFIT.
“The true resilience of Russia’s economy will be revealed only when the war-related fiscal expansion is over.”
Currently, however, the signs still point to war.
Russian companies are constantly looking for new ways to somehow circumvent Western sanctions.
Important trading partners such as India are already expressing concern and could turn away from Russia.
Early signs of economic decline can already be seen.
With material from Reuters