- Russia’s war economy ins’t in imminent danger of collapse, economist Vladislav Inozemstev said.
- That’s because Russia has adapted to the war and looks more stable than it did a few years ago.
- “The war, formally an ’emergency,’ has been rethought as a ‘new normal’ that can be waged indefinitely.”
Russia may stand a better chance at sustaining its war economy than previously thought.
That’s according to Vladislav Inozemstev, an exiled Russian economist who thinks the chances of an economic collapse in the country have dwindled despite the chorus of experts who predicted a grim economic future.
Inozemstev, who has been critical of Putin’s regime and left Russia after being labeled as a “foreign agent” in 2023, said the nation’s trajectory looked similar to the Axis Powers in the 1930s, when the group of nations rose to prominence partly due to their “highly effective market economies,” he wrote in a recent op-ed published by the Middle East Media Research Institute.
The comparison suggests that Russia will be able to sustain its war-driven economy for longer than many expected, he said, dismissing the notion that Russia was headed for a Soviet Union-style collapse.
“The war, formally an ’emergency,’ has been rethought as a ‘new normal’ that can be waged indefinitely. Even though many experts are still talking about the aggravating slowdown in Russia, the Kremlin is mostly right: These days, the economy is the Russian dictator’s reliable rear,” Inozemstev said. “To conclude, I would argue that Russia seems to have become a long-term threat to the Western world whose chance of economic collapse is extremely small,” he later added.
Russia’s finances appear to have stabilized since the early days of the war, when even the Kremlin admitted the economy was on the verge of collapse.
Federal revenue has exceeded expectations for the past several years, Inozemstev noted, rising 28% on an annual basis from the months of January and October, according to Interfax.
Russia also posted a small budget surplus through the first nine months of the year and is estimating only a small budget deficit of 0.5% of GDP in 2025, according to data from Russia’s finance ministry.
Russia’s economy has held up partly due to its hefty war spending, experts have said, which has boosted growth despite soaring inflation, high interest rates, and a labor market short of millions of workers.
Russia has also taken measures to boost business activity, Inozemstev said, such as by not hiking taxes for entrepreneurs and self-employed workers, while implementing subsidized loan programs for businesses. That means many businesses are sheltered from the pain of higher borrowing costs — and they could actually benefit from the surge in inflation in Russia, which could raise profits, he added.
Bank deposits from Russian citizens and corporations, meanwhile, have swelled 54% since 2022, according to central bank data.
Russia’s war economy also looks to have gained the acceptance of the Russian people, who are benefiting from higher wages amid the nation’s severe worker shortage. It’s another key factor that makes Russia’s economy likey more stable than many have thought, Inozemstev said.
“The economy, I would argue, is now undergoing another wave of adaptation to the changing conditions,” Inozemstev wrote. “The people realize that the ‘war economy’ has substituted the anemic economic condition of the 2010s.”
Inozemstev said he expected Russia’s economy to continue to grow in 2025 and beyond, forecasting 2%-2.5% GDP growth next year. The International Monetary Fund has said it is expecting Russia’s economy to expand by 3.6% in 2024.
Read the full article here
