A report by Russia Today (RT) said the Russian economy has not only survived Western limitations, but has seen better growth through fresh trade connections and raised investment in domestic production. Given Moscow's success, international experts and politicians have questioned the effectiveness of these obsolete sanctions. They implied that such moves could only cause more harm to the worldwide economy.
But according to the Russian Academy of Sciences, the failure of Western sanctions stems from the "big country trap" effect. Under this effect, a resource-rich country spanning 11 time zones cannot be isolated. Even Russian President Vladimir Putin agrees, frequently pointing out that the West "is shooting itself in the foot" with the restrictions. (Related: Western sanctions on Russia "seriously underestimated" Moscow's economic strength.)
Russia's gross domestic product (GDP) has shown extraordinary strength in the face of external pressure; it is predicted to grow by about 3.5 percent in 2023. The Russian Federal State Statistics Service (Rosstat) said on Dec. 29 that the country's economy experienced a 1.2 percent decrease in 2022, 0.9 percent lower than the earlier 2.1 percent decrease estimated.
"The changes in the GDP estimate for 2022 are due to the receipt of annual results of federal statistical observations and annual budget (accounting) reports of the Federal Treasury," Rosstat said. The agency added that it had also amended the figure for 2021 GDP growth to 5.9 percent, up from the earlier estimate of 5.6 percent.
Russia's economy has bounced back strongly in 2023, aided by rising government spending – specifically on military production. A Reuters poll of analysts projected that Russia's GDP could increase by 3.1 percent in 2023, but also noted growth dwindling to 1.1 percent in 2024 as high interest rates weigh down the economy. Putin projected a 3.5 percent growth rate for Russia's 2023 GDP on Dec. 14.
The country's GDP growth for the third quarter of 2023 was affirmed in early December at 5.5 percent, compared to the same period in 2022 that saw Russia's GDP shrink by 3.5 percent. Given this, Moscow is anticipated to outperform the economies of the Group of Seven, the European Union and all other nations that joined sanctions in terms of GDP growth. Industrial production growth is estimated at 3.6 percent, and external public debt has reduced from $46 billion to $32 billion.
The government has committed to continue working to lessen inflation, which remains persistently high, and is expected to reach seven percent. Real wages in Russia also continue to increase and real incomes are estimated to have risen five percent this year, amidst a historically low unemployment rate of 2.9 percent.
Because of the external pressure on the Russian economy and the national currency, the Central Bank of Russia (CBR) took a timely decision to back the ruble, which had plunged to a 16-month low against the dollar and euro in mid-August. The CBR's 16 percent interest rate hikes have led to a fall in imports and, consequently, a decrease in demand for foreign currency from importers.
The Russian currency's bounce back has sped up following capital control measures initiated by the government. Analysts predict the ruble's rally to remain in 2024.
Moreover, a decrease in the budget deficit after growth in oil revenue together with increased sales of foreign currency earnings by Russian exporters has also affected the exchange rate, The Russian budget has decreased its reliance on oil revenue, as the government has long tried to spread out income sources and scale back the share of exports of natural resources like oil and gas in its budget revenue.
Income from outside the oil and gas sector is projected to surpass three trillion rubles ($32.7 billion) in 2023, as reported by Russian Finance Minister Anton Siluanov. At the same time, Russia's revenue from oil and gas exports is increasing and has surpassed expectations. Since Western countries effectively prohibited its oil and gas, Russia has efficiently diverted energy exports to Asia.
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