The Carnegie Endowment, a Washington-based think tank, pointed out that Russia’s economy is still strong despite rising military spending and Western trade restrictions. The International Monetary Fund has predicted that this year the country’s economy will grow faster than all other developed countries, including the United States, Business Insider claims.
That’s partly because Russia has been able to find ways around sanctions, Carnegie Endowment researchers explained. For example, Russia sells oil to its allies and imports Western goods through third countries.
“A paradoxical situation has arisen. Russia’s economy is now stable both despite and because of Western sanctions,” Russia-Eurasia Center analyst Aleksandra Prokopenko wrote in the report.
According to her, this hard-won stability is not forever – the current order will begin to crumble after eighteen months at the latest. This will happen due to growing trade imbalances and possible social problems.
The “triad” of problems
According to Business Insider, Russia faces three important problems: financing the military, maintaining the standard of living of Russian citizens, and economic stability. It is becoming increasingly difficult for the Kremlin to achieve these goals.
Signs of weakness have already begun to surface. This year, the Kremlin plans to spend a record amount on its military. This can be an obstacle to the country’s economy, because defense spending is unproductive, and it is not clear when the war between Russia and Ukraine will end, A. Prokopenko testified.
Living conditions may begin to deteriorate in Russia. While economists say Russians are living a largely normal life for now, inflation has soared, prompting Russia’s central bank to raise interest rates to 16 percent. If the central bank succeeds in reducing inflation, it will also reduce workers’ incomes – the economy will begin to shrink.
“This increases the risk of social dissatisfaction, nobody will be happy to reduce wages,” added A. Prokopenko.
Although Russia has measures in place to help it maintain a stable economy and avoid recession, economists have warned that it faces a bleak future, with a shortage of workers, falling productivity and increasing isolation from the rest of the world, according to Business Insider.
“There is little incentive for sustainable development in an economy subordinated to political demands. Sooner or later, this will harm the well-being of ordinary Russians. In other words, temporary economic corrections and a decline in living standards will contribute to the political and economic problems faced by the Kremlin,” said A. Prokopenko.
Experts have warned that in the near future there may be social unrest in Russia, especially if living standards continue to deteriorate.
Three economists told Business Insider that there could be mass unrest in the country by the end of the year, especially if the West continues to tighten sanctions against Moscow.
Prepared according to information from UNIAN and Business Insider.
