France 24: Russia doing better than expected despite sanctions: IMF
Washington (AFP) – Despite damaging Western sanctions imposed on Moscow in the wake of the invasion of Ukraine, Russia's economy appears to be weathering the storm better than expected as it benefits from high energy prices, the IMF said Tuesday.
The sanctions were meant to sever Russia from the global financial system and choke off funds available to Moscow to finance the war.
But the International Monetary Fund's latest World Economic Outlook upgraded Russia's GDP estimate for this year by a remarkable 2.5 percentage points, although its economy is still expected to contract by six percent.
"That's still a fairly sizable recession in Russia in 2022," IMF chief economist Pierre-Olivier Gourinchas told AFP in an interview.
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WNU Editor: I expected the Russian economy to be hit hard when these new sanctions were imposed in March. So did everyone else.
But it did not happen, and the Russian ruble is now one of the best performing foreign currencies in the world.
Here are some of my reasons on why Russia's economy is doing better than expected.
1) China is the world's manufacturing super-power. The U.S. is the world's financial super-power because of its reserve currency status, and the world's leader in developing new technologies. Russia is the world's resource based super-power. It is very difficult if not impossible to successfully impose sanctions on any of these three nations because of the critical role that each play in the global economy. A fact that the West is quickly learning when it comes to Russian oil, gas, strategic metals, and agricultural products.
2) Russia has been living under sanctions for 8 years. They learned to adjust during this time period. And with these new sanctions they knew what needed to be done.
3) Russia is not a poor country. Even though billions in foreign currencies were seized by the West from Russian financial institutions, Russia still has hundreds of billions more. The government also holds massive gold reserves, and the government's financial books are solid with little or no debt. The banks are solid, and the Central Bank has been following policies grounded in economic reality.
4) Russia's underground economy is huge, and it is always ignored in official GDP calculations. Everyone I know in Russia has a side-hustle or two. The small business concept is alive and well in Russia. In fact, it is promoted and encouraged from all levels of government to keep everyone employed.
But all is not rosy. Here are the troubling signs that I see.
1) Inflation is a worry. It is going down, but there is still a huge demand for Western products, and importing them from third parties has made the cost of these goods very expensive.
2) Being cut-off from Western technology. This is the 21rst century. You need access to new technologies to grow and develop.
3) Being cut-off from Western financial and banking resources and services. This adds to the cost of everything.