The long-term view showed that the Russian economy was declining rapidly, despite stability in the first months of the war.
The first months of Russia’s invasion of Ukraine last year sent oil and natural gas prices soaring, costing Moscow huge profits. However, the war is now in its second year, Western sanctions are intensifying, Russian government revenues are shrinking, and its economy is on a long-term slower growth path. It was reported by The Wall Street Journal.
The country’s biggest export commodities, gas and oil, have lost their main customers. Since November, the ruble has fallen more than 20% against the dollar. The workforce dwindled as young people went to the front or fled the country for fear of being drafted into the army. Uncertainty inhibits business investment.
Due to the loss of the European market and the exit of Western investors, the Russian Federation is increasingly dependent on China.
Moscow now says it will cut oil production by 5% in June from previous levels. It sells its oil at lower prices compared to world prices. In the first two months of this year, the Russian government’s energy revenues fell by almost half compared to last year, and the budget deficit deepened.
The IMF estimates that Russia’s potential growth rate – the rate at which it can grow without fear of inflation – was around 3.5% until 2014, when it annexed Crimea. Some economists say that number has now fallen to 1% as productivity declines and the economy becomes technologically backward and more isolated.
The media said Russia had been trying to implement import substitution – to replace foreign goods with domestic ones – for years before the introduction of the current sanctions, but with limited success. Much of the telecommunications equipment and software for oil drilling is imported.
According to the Gaidar Moscow Institute for Economic Policy, the country’s industry is in the worst state of its labor force since records began in 1993.
It will be remembered that the media previously said that the Russian Federation has introduced a fee for exiting the Russian market.
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Source: korrespondent
I am David Wyatt, a professional writer and journalist for Buna Times. I specialize in the world section of news coverage, where I bring to light stories and issues that affect us globally. As a graduate of Journalism, I have always had the passion to spread knowledge through writing.