A turning point has occurred in the Russian economy: “Like an ax to the bottom”

“The Russian economy is like an ax to the bottom,” Ž. Mauricas wrote on Facebook. – Before the start of the Russian military invasion of Ukraine, the Russian budget grew extremely fast: both income from oil and gas exports (due to rising oil and gas prices) and other income (due to the rapidly growing Russian economy and recovery from the COVID-19 pandemic) grew. “

According to him, the Russian economy in 2022 in January it grew as much as 8.1 percent, in February – 5.4 percent. According to the economist, if it were not for the invasion of Ukraine, it is likely that the Russian economy in 2022 would have grown by about 5 percent.

“After the beginning of the Russian military invasion in Ukraine, economic sanctions were imposed on Russia, which dealt a blow to certain sectors, for example, the volume of car production in Russia fell by almost 90 percent due to the sanctions applied.

However, the short-term impact of the sanctions on the oil and gas export sector was negligible, and Russia’s oil and gas export revenues continued to grow due to increased global oil and gas prices. This helped offset the loss of other budget revenues, so Russia’s total budget revenues continued to grow,” he explained.

However, a turning point occurred in July and Russian budget revenues began to decline. In July, it decreased by as much as 26 percent.

“This was due to both declining revenues from non-oil and gas exports (due to economic sanctions) and declining revenues from oil and gas exports: Brent fell below $100 per barrel in July, while Russian Urals crude the price is below 70 USD per barrel and has become lower than in 2021. in July.

The price of gas remained high, but in July the volume of Russian gas exports to the EU decreased by as much as 3 times, which also slowed down the growth of income from gas exports,” said Ž. Mauricas.

In addition, he recalled that Russia is forced to apply a huge discount of US$25-35 per barrel to its oil due to the imposed sanctions, and the situation has been exacerbated by the strengthening/strengthening of the official ruble rate, as the 2022 July. the price of Russian “Urals” oil, calculated in rubles, was 22 percent. lower than in 2021 July.

The economist concludes that if trends continue, and there is a high probability that they will, the Russian economy will face major challenges in the near future, as declining budget revenues will not only make it difficult to finance the military invasion of Ukraine, but may also lead to belt-tightening with all its negative side effects. , such as higher bankruptcies and rising unemployment.

“Due to high gas and electricity prices, the coming winter will be difficult not only for us, but also for Russia (due to economic recession and tightening of belts)”, wrote Ž.Mauricas.

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