Founder of the Center for Post-Industrial Society Studies, a Moscow research center, Vladislav Inozemtsev is an economist critical of Vladimir Putin's regime. He has been classified as a “foreign agent” by the Russian justice system in May 2023 and went into exile in Washington, where he participated in the creation of an opposition think tank, the Center for Analysis and Strategies in Europe, based in Cyprus.
Is the Russian economy healthy two and a half years after the start of Western sanctions?
Yes. It is expected to grow by 3.5% to 4% in 2024. In fact, Russians are earning more money: real wages increased by about 10% in the first half of this year. There is inflation, of course, above official targets, and this affects consumers' purchasing power. But in 2023 and 2024, incomes are growing at a much faster pace, so Russians realize that well-being is increasing, not decreasing.
The economy is certainly fuelled by high government spending, but it appears that this is indeed generating growth. The budget is fuelled by additional revenues not only from export earnings but also from domestic economic activity. From January to August, these revenues increased by 27.3% compared to 2023. The federal budget is therefore in good shape, with a deficit limited to 0.2% of gross domestic product (GDP) over the first eight months of the year. The Ministry of Finance should even be able to increase budgetary expenditures for the rest of the year.
The Russian economy will slow down in the second half of the year, but it will not plunge into recession. In 2025, GDP growth is expected to be 2.5% or even slightly less. However, this is not at all a problem for the country's economic and political stability.
So have Western sanctions had no effect on the Russian economy?
Yes. They have an effect, there is no doubt about it. These sanctions affect certain sectors: the military-industrial complex, the automobile industry, steel, natural gas production, civil air transport, etc. What does not seem to be affected at all are the service sector, most banking activities, residential construction, agriculture and everything related to basic necessities, and wholesale or retail trade.
Therefore, the sanctions are not too damaging for the Russian economy at the moment. Moreover, they do not change much in the behavior of “ordinary” Russians, since their lifestyle, which is not affected much, depends mainly on locally produced goods and services. As for the upper layers of the middle class, who are the biggest consumers of Western products, they have either left the country or have become accustomed to the new realities.
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Source: Lemonde
