Systematically, the Russian economy is gradually breaking down despite the beautiful economic growth figures.
Russia is experiencing faster economic growth than any G7 country, but the nominal growth figures support insane weapons production costs. In the long term, this economic model puts Russia at great risk, writes BBC economic commentator Faisal Islam.
Last week, the International Monetary Fund (IMF) said the Russian economy was resilient to sanctions, raising its growth forecast for this year from 1.1% to 2.6%. These figures were achieved due to the military mobilization of the economy: military expenditures account for up to 40% of the budget, which corresponds to the level of the late USSR.
To a large extent, the Russian economy is saved by the low effectiveness of oil sanctions. Russia’s oil production remains at 9.5 million barrels per day, just below pre-war levels. Russia circumvented sanctions by purchasing a “shadow fleet” of hundreds of tankers that now carry oil to India and China.
However, experts note that this year the demand for oil and gas will peak, so competitors from the Persian Gulf will begin to produce more, pushing Russia out of the market.
In addition, the production of tanks and shells, which are irretrievably lost in Ukraine, although it adds numbers to the statistical indicators of GDP growth, in practice is an unproductive part of the economy. Therefore, in the long term, the Russian economy is only losing. Although we shouldn’t expect a collapse of the Russian economy before the end of the year either.
“Russia’s war economy cannot sustain itself in the long term, but it has bought the country extra time,” the observer notes.
Economic situation in Russia
As wrote, Russia is becoming economically more and more dependent on China. As the CIA noted, Western sanctions have further strengthened ties between Moscow and Beijing. In fact, Russia is turning into a Chinese economic vassal.
A significant bias towards military production leads to disruptions in the work of purely civilian sectors of the Russian economy. For example, in Russia there are systematic problems with providing the consumer market with such basic products as chicken meat and chicken eggs.
