Russia’s GDP growth shows resilience against Western sanctions. But it only tells half a story

Russia is now the most sanctioned country in the world, with 19,000 sanctions against its different entities and individuals. Despite Western penalties and the rising costs of an already expensive war, the Russian economy has managed to show resilience. This becomes even more prominent as Europe’s biggest economy, Germany, has shrunk by 0.3 per cent.

The real challenge before Russia is to turn its current resilient GDP growth – driven by massive spending on the military-industrial complex drawn from its remaining reserves, dwindling oil and gas revenues and undefined but rising non-oil and gas revenues – into a sustainable state programme that fosters industrial development in other areas as well. However, the path ahead remains a very rocky one. Swasti Rao Associate Fellow, Europe and Eurasia Center, at the Manohar Parrikar Institute for Defence Studies and Analyses, says in this week’s column
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[eltonbritt]

This is called real and objective analysis. You don't see that in Western media these days..

[MattsFikezolo-lowq]

The most objective analysis by an Indian analyst.

[Growth-Of-Leaders]

As long as China, India, and other major global South countries are not abiding by Western sanctions, Russia will survive. The government investments in Russia are not limited to military industries. Civilian industries are also rising. Western sanctions against Iran and Cuba for decades have not succeeded. But Russia is bigger and is connected to China.

[tresphore]

Instead of waiting to see what Russia is doing in all those areas you mentioned. I took the time to travel to Russia and looked broadly at its industrial production capabilities, the improvements made before the SMO begin. It's true to say the country have invested greatly in it's military industry, but they are equally investing massively in various technological areas. It was interesting to see how the local economy is doing in cities and rural areas. Rural areas was in fact something i wanted to critically look closer and obviously they are challenges from place to place. The best picture of interpreting the true outlook of the Russian economy going forward is by looking at what kind of interventions being implemented by government. There is a lot happening and and I was surprised that most countries haven't looked at the fundamentals that are driving the Russian. While remains an important component, it is not the reason behind russians growing economy. I hope others had an opportunity to see what is happening on the ground. To some extent, the sanctions pushed the country to capture most of it larger companies under Russian ownership.We might have speculations and assumptions regarding it's economy. The real challenge lays in countries like India, china among others to find secure payment alternatives that enables both countries to trade flawlessly unlike the current situation where India is doing everything not to irritate USA or the European union. And I am fully convinced that this will happen really soon.

[gezalesko]

and Russia's GDP is not "dog grooming" and "financial services"...

[olderchin]

Seriously, she has to go back to school to learn fundamental economics. Not use wall street economics to interpret national economic data.
1) What is economics? It is function of a country ability to create sustainable livelihood for it citizens. This can be done by the government providing all employment or all necessities like a socialist country. Or it can depend on the people ability to produce and trade among themselves to generate a sustainable livelihood for all, capitalism.
2) Trade. If a country cannot produce a necessity, it needs to import it. In return it needs to export something of equal value to pay for its import. Essentially, all trade is barter.
3) As there may be delay between the import and export, buying and selling. A form of accounting is then needed and this is in the form of units of money. This applies for both local and foreign trade.
4) If a country is unable to sell enough to buy what it needs, it has to temporarily owe its trade counterpart an equivalent in future goods. The counterpart country has to basically keep the foreign money in reserve until it can use this money for the goods that it needs.
5) Essentially, a country is doing fine if it can maintain a balance in foreign trade while keeping its people fed and sheltered. Having a surplus of foreign trade is unnecessary, even risky as the value of the foreign money may depreciate or even defaulted upon.

Now tell me why Russia's economy is in danger ? Russia is resource rich and is technologically advanced. Russia is self-sufficient in food and shelter. It needs to export only if it needs to import. So it exports energy and metals to China or any other country in return of cars and gadgets, or the parts and machinery to produce them. The more they produce stuff at home, the more its local productivity increase, GDP growth. Is this a bad thing ?

[TimVoktwo]

You are asking too many questions. Study Putin's substitution program to be self sufficient, and Russia's natural resources under their feet, millions of hectars of agricultural lands, and millions of square miles of oceans in their economic zone. In addition, the 454, 000 engineering, manufacturing, and construction graduates annually, that can develop those natural resources. They have the tools, the resources and the talents. In reality, Russia I believed is the only country on this planet that could be self sufficient. Just saying.

[shubharao]

Well done! its well analysed and well presented.

[OnlyTheTruth]

Thanks Swasti - very good analysis and commendable insights . You are one of the best on Print

[jaydesai]

Thanks Mam. I enjoyed your analysis.

-By Jay Desai

[MarcusDanny-rtfl]

Russia has gained 12.4 trillion wealth rich minerals, coals, much in this wars it benefit Russia more than its losss its a fact, Russia will benefits in future
Ukraine should be intergated in Russia

[parthoprotimganguly]

Only straight and true.Strength of socialistic and democratic operation.

[temp]

Problem is we still dont know what is driving russian economy. It maybe that russian consumption market (which increased because of the increased defence spending) is facing a void due to foreign companies leaving russia abrubtly. If that is the case, its really not real growth because that void will be filled soon and after that, you will see a slump in that growth (the non oil based component).

In all this, we should remember that Russia is not a democracy anymore. Even if the average russian suffer due to bad economy or lack of import of important goods and services, it wont result in collapse of the state. Problem is as the war rage on, russia is losing its talent pool of young russians bith due to casualities in war as well as brain drain to other nations which is a very critical asset in a post-hydrocarbon world.

[prashantsingh]

Good analysis, your crystal clear views helps to see geopolitical things in a better way, thank you

[dreamtree-qu]

SwasRao, this is one of your best and finest. I have never seen this kinda thorough analysis of Russian data being done in India.
Iam no expert of European politics or War but I have common sense to see that Russia is caught on the wrong foot with this geopolitical blunder.
More power to your pen lady-- just read your complete article and I must complement you for using savage references straight from the Russian Ministry for your arguments.

I am really impressed. Must congratulate the Print team for having such a gem of a scholar.

[Shortforfuture]

Just go through...Though it remains to be seen how long Russia can keep its heavily restricted economy going...

[AtulSharan]

Can you validate oil and gas production figures? If the export has gone down, there should be some report confirming production cuts. Else the non oil and gas export speculation would suggest something else is going on here.

[thewestiswasted]

Despite all these financial setbacks you have just mentioned,

Public transport
Airtime and data
Food products
Fuel ⛽
Gaz
Electricity
Medical treatment
Service delivery
Restaurants and food delivery

Are not only the best currently in the world but also the cheapest. These are simply facts 💯
Enven the snow here is whiter.

[nitishbhushan]

Dr. Rao both shares the strengths and softness of the Russian economy. Sanctions have worked on Russian economy but not to the extent that the West would have wanted. This is due to the war economy and internal consumption. Russian economy has shown growth and resilience, but the sustenance of this is under a cloud as the war economy is overheating. Once the war gets over, and it will get over, war economy will slow down. Also, the details of non-hydrocarbon economy are not known. It will be interesting to see how Russians navigate out of this situation.

[Zgreasewood]

When Putin took control of Russia the Ruble was 10 Rubles to 1 US DOLLAR, TODAY IT IS 93 TO ONE US DOLLAR. It takes 93, 000 Rubles to buy $10, 000 US dollars today. Average retirement pay is less then $200 US DOLLARS a month. Not reported on sites like this.