In fact, Moscow’s new 2.8% GDP projection weighs in under the IMF’s latest ‑ also upgraded forecast, of 3.2%, released last week.
It might be tempting to put this resilience down to a massive defense build-up. But the Washington-based IMF had much the same assessment as President Vladimir Putin’s team: a strong job market and swift wage rises are helping to power consumer spending. The fund even cautioned “there are some signs of overheating,” with unemployment at a record low.
What about all the Western sanctions, the mass emigration of Russian talent and the departure of a number of global corporate giants? Alexander Isakov at Bloomberg Economics offers some insight.
The sanctions on Russian energy aren’t as tight as they were for, say, Venezuela and Iran, thanks in large part to the West not wanting to worsen its own cost-of-living shock with a further surge in oil prices.
Some financial sanctions had already been imposed in 2014 after the Crimea invasion, and Russia had already amortized that cost.
Russian households remain confident thanks to a tight labor market, with the jobless rate at 2.8%. A largely voluntary military recruitment model, using monetary incentives, has let consumers keep calm and carry on.
Since some large multinationals have stayed in place, will Russia’s economy just keep on ticking?
Isakov notes that part of job market’s tightness is indeed a side effect of fiscal outlays tied to the war, funded in part by energy exports. Moscow needs crude prices to stay around the current US$90 a barrel levels to keep the budget balanced — a slump to, say, US$60 could make things difficult.
The IMF sees growth slowing to 1.8% next year, and cautioned that Russia’s potential growth rate has dropped to around 1.25% from 1.7% before the war.
This would mean that Russia’s income per capita may no longer converge toward Western European levels in the medium to long term, but for now, Russia’s chugging right along
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