Is the Russian economy standing on the brink of the abyss?

Russian President Vladimir Putin confirmed that the Russian economy is stable and reliable despite sanctions, inflation, and fluctuations in the exchange rate of the national currency. Experts warn that while many economic indicators may look relatively good, this may reflect “fundamental problems facing Russia.”

Alexandra ProkopenkoHe points out, from the Center for East European and International Studies (ZOiS) in Berlin, the mobilizing nature of the country’s economy:

“The Russian economy is working at the limit, at the absolute limit of its capabilities. This can be verified, first of all, by an indicator such as unemployment, which has reached historically low levels. This means that there is literally no one working in the country, when there is no Someone is working, which means that production capacity is stretched to the limit. “Therefore, the Russian economy is doing everything it can to overcome the pressures it faced after Vladimir Putin decided to invade Ukraine.”

It will get worse

Inflation expectations, which appear disproportionately optimistic, and the income situation also worry specialists. He warned that next year could be much more difficult for citizens and the country’s economy as a whole. Ruslan GreenbergDirector of the Institute of Economics of the Russian Academy of Sciences:

“I think it will be worse, because (it) shows up in the trade balance. First of all, we see that export income is falling seriously. Oil export income is our most important source of income. This income has already fallen by between 40% and 45%, It seems that this trend will continue.

Greenberg draws attention to the low average annual growth rate of the Russian economy over the past two decades, compared to other countries and regions, such as the United States and the European Union. He attributes this to the policy of the authorities, which tend to actively interfere in economic processes and resort to “manual regulation.”

From crisis to crisis

For his part, Prokopenko points out that Russia is already witnessing its fourth crisis in 15 years. As a result, Russian managers have become good crisis managers. He wonders: “But can they manage the economy in times that are not crises?”

The analyst predicts a serious deterioration in the country’s financial and social situation after the end of active fighting in Ukraine and the cessation of government contracts that keep defense companies busy. However, he says, hyperinflation and empty store shelves like in the 1990s are unlikely in Russia.

The Russian government recently upgraded its economic growth forecast for 2023 to 2.8%, and GDP is expected to rise by 2.3% next year. The unemployment rate fell, according to official data, to 3.1% in the summer, which is a record high in the history of modern Russia.