The Russian regime presents the current economy as a triumph that it masterminded. “We have completely gotten over the recession of last year and growth is picking up,” Putin told
his loyal foreign guests at the Valdai Club
Indeed, in the third quarter of 2023, Russian GDP
, according to Rosstat, was up 5.5% year-on-year, and growth in real disposable household income
came in at 5.1%.
It seems that the economic crisis of 2022 triggered by Western sanctions is already a thing of the past. Moreover, not only industrial indicators recovered, but even measures of living standards. Given the ongoing war, this looks like an economic miracle. A year and a half ago, at the beginning of the war against Ukraine, it seems that not a single expert foresaw anything like it.Sanctions overcome
However, not all Russian analysts agree with the official GDP growth estimates. The MMI Telegram channel, which is considered close to the Central Bank, responded
rather irritably to Rosstat’s triumphant reading: “it’s complete nonsense, of course. Games with deflators in the production of defense goods... For the year (i.e., for the whole 2023 – Shelin)they can roll out any figure.”
Indeed, such “games with deflators” – manipulating how last year’s prices are converted into current ones – were almost certainly played. This can be seen from indirect indicators. For example, loading volumes on railways are considered to well reflect the situation in industry and construction, and overall for the period January-November 2023 volumes remained
at the same level as in 2022, while in November they decreased
In addition, even the rapid growth that actually took place across the economy in the last months of 2022 and at the beginning of 2023 stopped 5-6 months ago. Consumption and real wages (seasonally adjusted) have virtually stopped
growing since June. Industrial production
has stagnated since May. In the month of October, industrial output was 0.6% lower than five months earlier. At the same time, defense industries that produce machinery and equipment saw average monthly volumes up 14% versus the pre-war 2021.
“Although economic activity officially continues to increase, the balance of factors driving the prospects for the Russian economy’s further development is extremely contradictory and likely unsustainable,” sums up
the government-linked Center for Macroeconomic Analysis and Short-Term Forecasting, whose analysis is considered relatively honest.
But what needs explanation now is not so much Russia’s economic problems (we shall discuss them below).