GDP Contraction of 4% and Inflation at 15%: Vladimir Putin’s Russia Is Sinking Into Recession.
The Russian people will pay more and more dearly for the consequences of Putin's war in Ukraine.
Vladimir Putin continues to boast that the resilience of the Russian people will make the difference in the odious war he has unleashed on Ukraine on February 24, 2022. However, you have to learn to step back and see that what Putin is saying is just propaganda to try to look good.
Contrary to what the Kremlin's propaganda would have us believe, and what Vladimir Putin's far-right allies in Europe would have us believe, Western sanctions against Russia are working.
Not at the rate expected by some, but at the rate expected by economic experts: slowly, but surely.
Russia's gross domestic product (GDP) contracted by 4% in the second quarter of 2022 compared to the same period in 2021, according to an official statistical estimate released Friday, August 12, 2022, showing the impact of economic sanctions against Moscow.
Even Russia's official statistics agency Rosstat has to admit it:
“GDP rose to 96% (of its value) in the same period in 2021, according to preliminary estimates. A more complete assessment would be published on September 9.”
These are Rosstat's first full-quarter growth figures for Russia since Moscow launched its offensive against Ukraine in late February 2022. It would not be surprising if Rosstat chose to downplay the economic consequences of Western sanctions with its figures.
This confirms anyway a Yale University study published in early August 2022 explaining that the Russian economy was approaching collapse. Putin's expansionist madness has also wiped out more than three decades of foreign investment in Russia. In short, Putin is forcing his people back to the Soviet era …
If the Russian GDP had registered a 3.5% year-on-year growth in the first quarter of 2022, according to Rosstat, Russia is now sinking into a period of recession. Even the Kremlin propaganda cannot deny it.
At the same time, the Russian central bank indicated on August 12, 2022, to expect a contraction of the GDP between 4% and 6% in 2022, then between 1% and 4% in 2023, before recovery in 2024.
The Deputy Governor of the Russian Central Bank, Alexei Zabotkin, said:
“The decline in GDP will bottom out in the first six months of 2023. The economy is heading towards a new long-term balance. With the transformation of the economy, growth will resume.”
Alexei Zabotkin hopes for a return to growth in 2024 by talking about the transformation of the Russian economy. But what kind of transformation could it be?
The famous pivot to China that Putin constantly talks about in an attempt to save face. But for the moment, this is more wishful thinking than anything else, as the Yale University study has already shown:
“As for the pivot to China desired by Vladimir Putin, it could be based on unrealistic optimistic assumptions. Russia is a minor trading partner for China, and most Chinese companies cannot risk violating U.S. sanctions. Chinese companies lack many of the upstream technologies needed to maintain and service Russian oil and gas supplies.”
Western sanctions, targeting the energy and banking sectors, in particular, have hit the Russian economy hard, with an impact on supply chains and exports. Inflation reached its highest level in two decades in April 2022, before slowing down. However, inflation in Russia remains high, reaching +15.10% in July 2022 over one year.
It is clear that the coming months and years will be even harder for the Russian economy, and therefore ultimately for the Russian people. The big question is to know how long the Russian people will be able to accept to pay a high price for the consequences of a war that they did not want and that they do not understand.
The ultimate risk for Vladimir Putin is to see the people finally withdraw their consent. The longer the war in Ukraine lasts, the greater the risk for Putin. And therefore the best for a victory of Ukraine in this war. A victory that would mean the victory of freedom and democracy over tyranny.
Some reading
Putin’s War in Ukraine Promotes the Revival of the Coal Industry Worldwide. A disastrous trend for the planet.
The West Validates New Measures to Support Ukraine Against Putin’s Russia. Ukraine continues to resist and even begins to lead counter-offensives against the Russian aggressor.
The Baltic Countries Are Showing the Way Against Putin’s Russia. An intransigence to support Ukraine that other more powerful European countries should follow.
Putin Tests the EU’s Cohesion. Europeans Must Stand Firm to Win the Autocracy vs. Democracy Battle. The current struggle is essential for the future of Ukraine and Europe.