No disasters, but sanctions on Moscow are working, according to Reuters


© Reuters. FILE PHOTO: Former First Vice President of the Central Bank of Russia Oleg Vyugin leaves the bank’s headquarters in Moscow, Russia February 8, 2018. REUTERS / Maxim Shemetov / File Photo


By Darya Korsunskaya

MOSCOW (Reuters) – Russia’s economy, which is on track to grow 5%-6% in 2022, has been hit by Western sanctions that have stalled growth for years and ushered in a period of industrial stagnation. technology, Russian economist Oleg Vyugin told Reuters.

Vyugin said no disaster had occurred, with sweeping sanctions imposed on Moscow during the conflict in Ukraine only 30%-40% effective as Russia sought to work around the restrictions. , but he warned of serious problems if Russia’s soaring export revenues fell.

“Without sanctions, the Russian economy could have grown by 6% this year,” said Vyugin, who served as deputy finance minister and central bank governor in his career before retired from a position at the Moscow Exchange this year, told Reuters. interview.

“In January-February, one could see a very strong takeoff coming. Turns out there was a negative impact. Instead of 5% growth, we were down 4%, so measures sanctions work.”

Russian officials have raved about Russia’s economic prowess in the face of sanctions.

President Vladimir Putin forecasts GDP will shrink by only 2% this year, a more optimistic forecast than his Economy Ministry’s expectation of a decline of about 3%, but much improved from expectations in April. of the World Bank on the 11.2% collapse -economy-by-45-percent-this year.

Russia’s current account surplus – the difference in value between exports and imports – more than tripled year-on-year in the first eight months of 2022 to a record $183.1 billion, as sales Revenues soared while sanctions sent imports plunging, although the central bank expects it to shrink in the second half of the year.

Vyugin said the bleak outlook for conflict is in sight.

“The numbers can vary, but the main result of the sanctions is that economic growth in Russia has been disrupted for several years,” he said.

“While export revenues are high, the economy receives very strong support,” he said. “If exports are severely restricted … this will cause serious harm and we will see the next cycle of falling GDP.”

After imposing the harshest sanctions on Russia in modern history, including cutting some of its top banks from the global financial system, Western countries and its allies they are currently preparing to limit the use of Russian oil and gas.

Meanwhile, China is reaping the rewards of cheaper energy supplies from Russia, as Moscow looks east to find alternative markets.

Vyugin expects some of the sanctions impact to be felt with the delay, particularly in the technology sector, which is heavily dependent on imports.

Industry sources told Reuters last month that Russian airlines, including state-controlled Aeroflot, had begun phasing out the jets to secure spare parts they no longer have. can buy abroad because of sanctions.

“The world will move forward, but Russia will only use some second-tier technology and spend huge resources to recreate what is already in the world, but cannot import,” Vyugin said.

“If the situation does not change, Russia will see the level of technological development gradually decrease.”

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