Russian President Vladimir Putin is confident that his country’s economy will adapt to the new situation created by the introduction of Western sanctions after the invasion of Ukraine. What’s more, it would only increase Russia’s independence. However, figures and forecasts do not present a good picture of the future.
Putin made his statement yesterday during a meeting with members of his government. He admitted that the sanctions are causing problems for Russia, “but we will overcome them just like in previous years”.
To get the latest stories, install our app here.
Among other things, he expressed his support for the idea of nationalizing assets of Western companies that are withdrawing from Russia, the Russian news agency TASS reported.
He further emphasized that Russia wants to cut itself off “from no one” and fulfill all its obligations to foreign countries. He discussed, among other things, the supply of oil, gas, fertilizers and metals to European and other countries.
Russian Finance Minister Anton Siluanov argued that a decline in Russian revenues would be offset by an increase in oil and gas revenues, which will increase partly due to the rise in energy prices.
According to Putin, Russia’s foreign partners cannot do without Russian agricultural products, and they want to maintain the supply. “Otherwise, they will have a hard time feeding their citizens,” he said with confidence. Agriculture Minister Dmitry Patrushev assured Putin that “this year the plan is to have good harvests of all agricultural crops in Russia”.
Russia would not suffer from shortages of essential products in stores, for the time being, it said. Potential problems would be related to “the restructuring of supply channels”. If, at some point, there are unreasonable price increases due to scarcity, state regulation of prices is a possibility, “but only as a last resort”.
Putin further urged to ensure construction projects are not halted, and the pace of mortgage lending is maintained. Deputy Prime Minister Marat Khusnullin stressed that the construction sector would be one of the driving forces behind the recovery and development of the Russian economy, even calling the situation “an opportunity”.
However, it is doubtful whether the situation is really that rosy. According to the International Monetary Fund (IMF), Russia’s economy will plunge into a deep recession this year. Director Kristalina Georgieva also says it is no longer “unlikely” that Russia will default on its debt obligations.
A country that can no longer pay off its debts and can no longer borrow money from the capital market can go bankrupt. It can then no longer invest in infrastructure or education, which in turn can lead to unemployment.
The ruble has already lost almost half of its value in the past month, and the prices of basic goods have risen sharply in Russia. That has given rise to hoarding. To get the latest stories, install our app here.
The Moscow stock exchange has been closed since the start of the Russian invasion, and the Russian Central Bank has imposed new capital restrictions, preventing companies from withdrawing more than $5,000 in cash for the next six months.
The Institute of International Finance – a global organization of financial organizations – predicted that Russia would see its gross domestic product (GDP) fall by 15 percent this year. That would wipe out much of the economic growth that has come since Putin took power in 1999.
It could get even worse, according to the Institute of International Finance. Because if the war escalates even further, even more countries could refrain from buying Russian energy. “That would drastically affect Russia’s ability to import goods and services and deepen the recession,” the New York Times reported. To get the latest stories, install our app here.