Russia enters recession nine months after the start of the offensive in Ukraine

Russia enters recession nine months after the start of the offensive in Ukraine

Russia technically entered a recession almost nine months after the start of the military offensive in Ukraine, and its gross domestic product (GDP) contracted 4% in the third quarter, according to an initial assessment published on Wednesday.

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The Rosstat statistics agency announced these figures after a second quarter already weighed down (-4.1%) by the strong Western sanctions adopted in spring to punish Moscow.

After two consecutive negative quarters, Russia is therefore in a technical recession, according to the commonly used definition. The previous one dated back to 2020-early 2021, years marked by the COVID-19 pandemic.

Limited imports and exports, staff shortages exacerbated by military mobilization, difficulties in the supply of spare parts…: the problems facing Russian companies today are manifold.

Structurally, the Russian economy is more dependent than ever on energy windfalls, responsible for roughly 40% of federal revenue.

According to the cabinet of Boris Titov, the business representative to the Kremlin, almost a third of the 5,800 Russian companies surveyed recently have suffered a drop in revenue in recent months.

And the mobilization of 300,000 reservists, announced on September 21 by Vladimir Putin, affected a third of the companies, according to this survey cited by the Kommersant newspaper. A significant proportion, despite government efforts to financially support the companies in question.

“The situation continued to deteriorate without surprise”, particularly in the “wholesale and retail trade”, “mechanical construction” or even “metallurgy” sectors, Dmitri Polevoï, investment director of Loko Invest in Moscow, told AFP.

However, this connoisseur of the Russian economy anticipated, like most observers, “a drop of around -4.5%” between July and September.

“Restructuring”

Because if activity does contract, Russia has withstood the avalanche of sanctions better than expected so far. The authorities first limited the damage by taking strict monetary measures, then took advantage of the increase in the price of hydrocarbons, particularly oil, which is easier to export.

Entrepreneurs have also improvised to provide themselves, avoiding sanctions, through third countries.

According to a forecast by the Central Bank of Russia made on November 8, GDP should contract by around -3.5% throughout 2022, a far cry from the doomsday forecasts forecast in spring.

The country officially remains at full employment, with an unemployment rate of 3.9% in September, according to the Rosstat statistics agency.

Après avoir haussé are taux directeur à 20% dans la foulée des premières sanctions, the Banque centrale russe (CBR) l’a fixed à 7.5% depuis mi-septembre et ne prévoit pas de le faire évoluer d’ici à la fin of the year.

This move is a sign of the ongoing “restructuring” of the Russian economy, according to CBR director Elvira Nabiullina.

“And not all sectors are affected in the same way” by Western sanctions, Valeri Mironov, an economist at the renowned Moscow Higher School of Economics (HSE) told AFP.

The Russian technology giants, VK and Yandex, for example, have announced strong growth in third-quarter turnover: the exit of many foreign competitors and the ban by the Russian authorities on the main American social networks have allowed them in particular strengthen your position. in the national market.

Inflation also stood at 12.63% year-on-year in September, several months down, according to figures published in early October by Rosstat.

But the general opinion is that the fourth quarter promises to be the most difficult. “GDP could fall even further, up to -7%”, predicts Dmitry Polevoï.

“Obviously, the problems are already present, but in reality we see their effects lasting until 2023”, observes Valéri Mironov.

“Sanctions are very powerful,” recalled Ms. Nabioullina on November 8. According to her, “its impact on the Russian and world economy should not be underestimated”.


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