Vladimir Putin has admitted that international sanctions against Moscow for its offensive in Ukraine “may” have “negative” consequences on the national economy in the “medium term”. “The sanctions imposed on the Russian economy in the medium term can really have a negative impact,” the Russian president warned during a televised meeting with the government. As the war continues into its second year and Western sanctions hit harder, then, a lengthy Wall Street Journal article argued that the Russian government’s revenue is being cut and its economy has moved onto a lower growth trajectory, likely long-term. According to the US newspaper, “the Russian economy is about to collapse” (UKRAINE WAR: ALL UPDATES LIVE).
WSJ: “Energy revenues down by almost half in 2023”
Much of the worsening outlook stems, the WSJ continues, from a bad bet last year by Putin, convinced that he could use Russian energy supplies to limit Western European support for Ukraine. As a result, the government’s energy revenues have fallen by almost half in the first two months of this year compared to last year, while the budget deficit has widened. The tax gap hit $34 billion in those first two months, the equivalent of more than 1.5 percent of the country’s total economic output.
Ruble dropped 20% against dollar, workforce reduced due to war
The current economic situation, explains the US newspaper, is forcing Moscow to immerse itself more in its sovereign wealth fund, one of its main anti-crisis buffers. The ruble has fallen more than 20% against the dollar since November. The workforce has shrunk as young people are sent to the front or flee the country for fear of being drafted. Uncertainty has held back business investment. “The Russian economy is entering a long-term setback,” predicted Alexandra Prokopenko, a former Russian central bank official who fled the country shortly after the invasion. Russian billionaire Oleg Deripaska warned this month that Russia is running out of cash. “There will be no money next year, we need foreign investors,” the commodity tycoon told an economic conference.