September 30, 2022

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One of the most famous Russian economists spoke: economic sanctions are working, the Russian economy is in serious trouble

According to Vyugin, there was no catastrophe in the Russian economy, according to him, the comprehensive sanctions introduced against Moscow achieved the expected effect only in 30-40%, because Russia was able to successfully reduce their impact. EDespite this, he believes Russia faces serious problems, as rising export earnings will fall.

Without sanctions, the Russian economy would have grown by 6% this year.”

– Vyugin, who spent his career as deputy governor of finance and the central bank before retiring from the Moscow Stock Exchange this year, told Reuters in an interview.

“In January-February, you could see a very strong recovery, and then came a strong negative shock. Instead of 5% growth We got a 4% dropSo the sanctions work,” he said.

It is constantly being said by Russian officials (and often in this country) that sanctions on Russia will not work and that Russia will resist sanctions.

President Vladimir Putin expects gross domestic product to fall by just 2% this year, a more optimistic forecast than the Economy Ministry’s forecast of a 3% decline, but an 11.2% decline than the World Bank’s April forecast – Reuters reported.

In their first spring 2021 forecast, Western analytical firms greatly overestimated the effects of Russian sanctions, expecting a decline of more than 10%. According to the data obtained from it, a decline of 4-8% is expected this year (which has already appeared in updated Western forecasts), which is deeper than the impact of the Corona crisis. And there’s no talk of a rebound here: the Russian economy could shrink even further next year. According to the forecasts of Russian banks and the Central Bank Next year, the decline may range from 1 to 8% (a large standard deviation involves considerable uncertainty), and the economy may reach pre-crisis levels in 8-10 years. Meanwhile The balance of the Russian budget is also deterioratingThere is no doubt that Western sanctions will not work.

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Russia’s current account surplus – the difference between the value of exports and imports – tripled to $183.1 billion in the eight months to 2022 compared with the same period last year, as energy prices rose and imports fell due to sanctions. fell again. According to the central bank’s expectations, this surplus will narrow in the second half of the year.

According to Vivek, the outlook is bleak as there is no end to the conflict.

“Numbers may vary, but the main effect of sanctions is that the process of economic development in Russia has been stalled for years”

– he said.

“When export earnings are high, the economy gets very strong support,” he said. “If exports are heavily restricted … it will do serious damage and we will see the next cycle of GDP decline”.

After imposing the toughest sanctions on Russia in modern history, including the withdrawal of some of its leading banks from the global financial system, the West and its allies are now preparing to clamp down on Russian oil and gas use. Meanwhile, China benefits from cheap energy supplies from Russia, while Moscow looks east in search of alternative markets.

Vyugin expects some of the impact of the sanctions to be delayed, especially in the technology sector, which is heavily dependent on imports.

industry sources told Reuters last month Russian airlines, including state-controlled Aeroflot, have begun scrapping planes to get parts that can no longer be bought abroad because of sanctions.

The world will progress, but Russia will only use some second-rate technology and spend huge resources to reproduce what the world already has, but the country cannot import.

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Vyugin said.

“If the situation does not change, the level of technological development in Russia will gradually decrease,” he added.

Cover image: Getty Images