Russia's economic strength could last another 18 months, think tank says

Reuters/Sergey Karpukhin

  • Think tank researchers write that Russia's economy will begin to see major challenges in the next year and a half.
  • As the war in Ukraine drags on for a third year, Putin faces a policy „attempt.”
  • „Russia's economy is now stable despite and as a result of Western sanctions.”

According to the Carnegie Endowment for International Peace, Russia's economic might will last another year and a half before it begins to fade.

The Washington DC-based think tank pointed to the country's show of defiance amid its aggression against Ukraine, saying the Russian economy remains strong despite rising military spending. Western trade restrictions. The International Monetary Fund predicts that the country will grow faster than all developed economies, including the United States, this year.

This is because Russia has been able to find ways around sanctions, such as selling its oil to its allies while importing Western goods through third-party countries, researchers at the Carnegie Endowment said.

„A paradoxical situation has developed: Russia's economy is now stable despite and as a result of Western sanctions,” wrote Alexandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center. Report. „But this hard-won stability is not eternal. In a best-case scenario, the current arrangement will crumble within eighteen months due to growing inequalities and potential social problems,” warned Prokopenko.

As it moves through its third year of war in Ukraine, Russia is dealing with a policy „effort” with three major issues facing the nation. For Putin, the issue is funding Russia's military, maintaining the standard of living of Russian citizens, and keeping the economy stable — three goals that are difficult for Russia to achieve, according to Prokopenko.

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Signs of weakness are already bubbling to the surface. The Kremlin plans to spend a record amount on its military this year. Because defense spending is „generally unproductive,” it could drag down the country's economy, and it's unclear whether the Russia-Ukraine war will end anytime soon, Prokopenko said.

Living conditions may also start to deteriorate. Although economists say Russians are living mostly normal lives, inflation has soared, prompting the central bank to raise interest rates to 16%. If the central bank succeeds in reducing inflation, it will fall on workers' incomes as the economy begins to shrink.

Falling incomes could also affect Russians' ability to repay debt, raising risk. Debt stressThe think tank said.

„This increases the risk of social discontent: no one will be happy to take a pay cut,” added Prokopenko. ,

Although Russia has the tools to keep its economy stable and avoid recession, economists have warned of a bleak future ahead, given the country's labor shortages, declining productivity and isolation from the rest of the world.

„In an economy subordinated to political imperatives, there are few incentives for sustained growth. Sooner or later, this will affect the well-being of ordinary Russians. In other words, temporary fixes and declines in living standards are political and economic headwinds facing the Kremlin,” Prokopenko said.

Experts have warned of near-term social unrest in Russia, especially as living standards continue to deteriorate. Three economists told Business Insider that the country could see massive unrest by the end of the year, especially if the West tightens sanctions on Moscow.

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