Sanctions do not sink Russia, Putin can also maintain military spending
Russia remains standing. Western sanctions have not succeeded nor do they appear to be able to bring it down. Of course, there are problems. Western sanctions, launched in response to Vladimir Putin’s invasion of Ukraine, have damaged Russia’s long-term prospects. Blocking the world’s ninth economy from accessing foreign technologies and skills has cut its growth potential by up to half, according to forecasts.
Oil and gas production, the lifeblood of the Russian economy, is about 3% lower than before the invasion and could decline further once European embargoes take effect at the end of the year. In the first six months of the war, between 250,000 and 500,000 Russians fled the country, according to Liam Peach of consulting firm Capital Economics. Many were highly educated and well paid.
Putin’s recent decision to launch a partial mobilization dealt a further blow to the economy. It resulted in a small bank run as people are once again worried about the country’s future. According to our estimates, the Russians withdrew $ 14 billion worth of rubble deposits in September, about a third of what in February. About 300,000 other Russians have probably fled. A further reduction in the workforce is exacerbating labor shortages and therefore inflation. Global inflation is down sharply from its peak, but price pressure in the labor-intensive service sector is worsening.
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