Lhen Russia invaded Ukraine a year ago, many countries condemned the aggression and applied sanctions in an effort to crush its economy and isolate it from world trade.
At the start of the war, the Russian economy was expected to shrink by up to 15%. Since then, these figures have been revised sharply upwards and the latest forecasts from the International Monetary Fund (IMF) show a contraction of just over 2% in 2022, and even moderate growth in 2023.
Certainly, many experts agree that the real situation is not so good, especially because the data coming from Russia is no longer reliable. Nevertheless, the fact is that Russia’s revenues have not been affected to the point of hampering its ability to wage war.
“In 2022, given the huge increase in energy prices, oil and gas revenues accounted for 45% of the Russian government’s budget”
Three reasons explain this.
First, Russian energy exports have remained mostly unsanctioned. Indeed, the European Union (EU), the largest importer of this energy, has not sanctioned these imports so as not to compromise its ability to meet its needs. For most of 2022, only around 8% of the global value of Russian energy exports was under sanctions. Given the huge increase in energy prices, oil and gas revenues accounted for 45% of the Russian government’s budget.
Second, effective Russian economic policy prevented the economy from going into freefall. The government has provided support equivalent to 3% of gross domestic product (GDP) in the form of social benefits, tax relief, loan subsidies, and minimum wage increases of a magnitude comparable to the support provided in EU countries to deal with the energy crisis.
There has also been an increase in public consumption to compensate for the sharp decline in investment and private consumption. At the same time, very rapid and significant intervention by the Russian Central Bank stabilized the exchange rate (albeit at considerably lower trading volumes) and provided liquidity to the banking system.
This prevented the economic crisis from turning into a financial crisis which would have plunged the economy into a negative spiral. Overall, these measures have been successful in protecting per capita income and preventing rising poverty rates.
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