“Russian Economy War” Leaves Country In “Shock”
- The state of Russia’s economy is stronger than many had anticipated six months after Moscow put troops into Ukraine, but ordinary Russians are beginning to experience difficulties.
- The economy ministry has downgraded its previous forecast of a 12% contraction this year to one of a 4,2% contraction.
- In order to lessen the impact of inflation, President Putin has ordered a 10% increase in pensions and the minimum wage.
With rising oil export prices reducing the impact of Western sanctions, Russia’s economy has avoided the collapse many expected after Moscow launched its soldiers into Ukraine six months ago. However, difficulties are beginning to emerge for ordinary Russians.
The economy ministry now predicts a 4.2% drop after initially estimating that the Russian economy would slide by more than 12% this year, eclipsing production declines experienced following the fall of the Soviet Union and during the 1998 financial crisis.
Despite devastating Western sanctions and inflation, the Kremlin has been able to carry on President Vladimir Putin’s promise to decrease poverty and inequality because to high global oil prices. Some economists have drawn comparisons between the current situation with the COVID-19 epidemic, in which the government raised payouts for individuals who were most at risk.
There are no Signs that the Standard of Living is Declining
According to Alexei Firsov, the creator of social studies think tank Platforma, “So far, there are no indicators that the decline in living conditions might result in unrest.”
The Russian proverb that refers to the conflict between people’s realities and what state television has conditioned them to expect reads, “The living standards decrease has not reached the point when attitudes toward reality start to shift considerably and the fridge plainly begins to defeat the TV.”
In the first seven months of 2022, Russia’s current account surplus—the gap between exports and imports—more than quadrupled year over year to a record $166.6 billion as revenues increased and imports fell as a result of sanctions.
To lessen the impact of inflation, Putin has ordered 10% increases in pensions and the minimum salary, while key businesses like Sberbank, the world’s largest lender, and gas giant Gazprom, increased pay beginning in July.
According to the Eikon database, the unemployment rate was 3.9% in June, the lowest level since the statistics department began releasing the data in 1992.
According to independent Levada Centre polls. Putin’s popularity rating increased by more than 10 percentage. Points from the start of the Ukraine campaign on February 24 to 83% in July.
Expense of living
According to the economy ministry, inflation, which skyrocketed to a 20-year high of 17.8% in April. After the rouble hit a record low versus the dollar, is now anticipated to conclude the year at 13.4%.
The rouble has now risen more than 25% this year with the aid of emergency capital controls, becoming the best-performing currency globally so far in 2022. This has assisted in taming inflation and put an end to the panic purchasing that followed the imposition of sanctions by Western nations.
While luxury products like Guinness beer. Zara clothing, and Nespresso coffee capsules have vanished from store shelves as a result of sanctions. Several Russians told Reuters they were also having trouble finding basic necessities like essential medications.
As many Western manufacturers have either stopped operating in Russia or abandoned the country completely. Some have expressed concern about a scarcity of auto components.
Due to a shortage of components, Avtovaz. The largest automaker in Russia, has reduced output and is giving certain employees voluntary redundancy.
Prices for the goods I purchase have increased by an average of 30%. said Larisa, a 65-year-old retiree from Belgorod. A city close to the Ukrainian border, “I, as a retired person, cannot afford what is on offer.”
Prices Has Increased from 4.7% to 10.7%
Consumer prices have increased 10.7% so far this year. According to official data, compared to a 4.7% increase during the same period in 2021.
Rosstat, a statistics agency, reports price increases of 27% for toilet paper. 39% for foreign-made autos, and 41% for sanitary pads during the last year. View More
Tatiana Lazar, a 33-year-old confectioner and mother of two from Moscow, said. I’ve started to spend more, but I’ve also started to save more. I don’t truly trust that costs would go down,” the person said. “Now I limit my needs, my demands in shops and in the style of living.”
Putin has long pledged to increase real disposable income. A gauge of people’s spending power, but a study by the official polling organization. VTsIOM revealed that as of the middle of February, 64% of Russians had no savings.
Living standards may still decline, according to online initiative Pricing.day, which monitors consumer goods pricing, which stated. “The economy has crumbled and shortages of even essential supplies are on the horizon.”
But for many Russians, little has changed in the past six months; they continue to go abroad, purchase Western goods, lament the high cost of living, watch TV, and back Putin.
State coffers should continue to swell as energy costs are predicted to stay high. Even as nations in the European Union attempt to wean themselves off of Russian gas and oil.
Russia has declared its intention to resume its practice of adding to reserves with extra oil earnings.
“People unwind, eat, go out, and spend money exactly as they did before,” said Emil, a 33-year-old Moscow resident.
Given how they (the West) intended us to live, “I think everything has normalized, more or less. I don’t think it’ll be us experiencing the frigid winter.”