Russian Economy Is in Dire Straits, Regardless of What the Kremlin Claims

( – Russia has been under heavy Western sanctions for more than 18 months now, since the country invaded Ukraine last February. President Vladimir Putin’s regime claims the trade restrictions aren’t working and the economy is in good shape. A leading Russian economist is challenging that picture, though. He says that no matter what the Kremlin claims, Russia is suffering badly.

Since Western nations imposed sanctions on Russia last year, Putin has consistently played down their impact on his nation’s economy. In July, he insisted economic growth and inflation numbers were “surprisingly positive.” However, economist Igor Lipsits says the real situation is very different, and official figures are being massaged to keep the Kremlin happy. Lipsits, who was fired from Moscow’s Higher School of Economics in August and now lives outside Russia, says runaway inflation has pushed many Russians into poverty, but the government doesn’t have good statistics on that. He believes up to 20 million Russians could be near or below the poverty line, many more are in debt and paying crippling 15% interest rates, and the Ruble is close to collapse.

According to Lipsits, Russian government economists don’t want to upset their notoriously intolerant president, so they’re shading economic figures to make things look better than they really are. Officially, the Russian economy grew by 5.5% in the third quarter of this year, reversing a 3.5% fall in the same period last year. However, this apparent growth isn’t making ordinary Russians any richer. Inflation peaked at 11.9% last year and is still running at over 7%.

Russia has a presidential election next year, and Putin plans to run again. He’s still popular and is likely to win, but that’s at risk if Russians feel they’re getting poorer. Unfortunately for him, the state of Russia’s economy can’t be improved by just pretending there aren’t any problems.

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