“Russia’s Economy is Falling Behind”

From Treasury’s assessment of the prospects for the Russian economy.

Following its invasion of Ukraine and the imposition of U.S. and partners’ sanctions and other economic measures, Russia’s economy in 2022 contracted by 2.1 percent (Figure 1),[ii] with record-high energy exports cushioning what would have been a far deeper contraction. Russia’s economy is over 5 percent smaller than had been predicted prior to the escalation, and it is far underperforming other energy exporters (including the United States). The war and associated multilateral sanctions are putting Russia’s economy under considerable economic strain, contributing to rapidly growing expenditures, a depreciating ruble, increasing inflation, and a tight labor market reflecting a loss of workers.

Sources: IMF and Treasury staff calculations. Pre-escalation Russian trajectory is the IMF’s 2021 Article IV forecast; the war economy trajectory is the October 2023 IMF WEO. Comparison countries are oil exporters: Brazil, Canada, United States, Saudi Arabia, Mexico, Iraq, the UAE, Norway, and Kuwait.

The graph is based on comparing the pre-war forecast from the IMF and the wartime forecast from October 2023 WEO. While not all of the difference can be attributed to repercussions surrounding Russia’s expanded invasion of Ukraine, that event is the one big macroeconomic development since February 2022.

It’s important to recall that GDP — the sum of all the final expenditures for both civilian and military uses — did not fall much in 2022, and has risen somewhat in 2023 only by virtue of the military component. Bank of Finland’s Heli Simola documents this in a just released working paper on this subject.  A key graph:

Source: Simola (2023).

See my assessment of what Russian GDP-ex-military looks like. The Treasury notes that household consumption fell by about 2% in 2022.

Moreover, the fiscal scene is becoming more precarious as the Russian SWF is depleted, and oil revenues decline relative to that experienced in 2022 (see BOFIT September post). In addition, inflation is rising (see also Economist).



55 thoughts on ““Russia’s Economy is Falling Behind”

  1. Jotta

    Is this really true?


    “Now even analysts at Bloomberg Economics say the rise in 2023 will surpass 3 percent. ”

    When Russia had sanctions on the agricultural sector, they build up their own agriculture.
    “The immediate impact of the embargo was a decrease in imports for domestic food consumption, from 35 percent in 2013 to 20 percent today. By 2016, food imports from the EU had fallen by 40 percent compared to 2013, and the trend continues.”


    Another interesting thought: The oligarchs cant park their money offshore anymore. So they are forced to invest it. In Russia!

    Wars have the nasty habit always turning in unexpected ways and often biting you in your own ass. While Putin did not expect to have to fight a war in UA and grossly underestimated the Ukrainians, the war is now going pretty bad. Pretty bad for the west.

    German general Eberhard Zorn predicted the Ukrainian counteroffensive will fail and was fired bc of that. He also predicted, Putin may open a second front. Possibly in Moldova, Georgia but also possibly in the Baltics. Europe is ill prepared for this: https://archive.is/fkOU9

    1. pgl

      “The oligarchs cant park their money offshore anymore. So they are forced to invest it. In Russia!”

      Seriously? You know nothing about how this stuff works – do you?

    2. pgl

      “Without ready access to these key drivers of long-term growth (including FDI, which has been net negative since February 2022, Figure 6), the Russian economy is primed to fall into a weaker, less productive trajectory.”

      Wait – who was that moron who tried to claim Russia is getting more investments from abroad? Oh Jotta the Putin stooge.

    3. Macroduck

      “When Russia had sanctions on the agricultural sector, they build up their own agriculture.”

      That’s not what your link says. The build-up of farm exports began prior to Russia’s 2014 invasion of Ukraine. The latest gain, according to your link, is largely because there hasn’t been the usual level of drought in Russia in the past few years. Nothing to indicate a big response to sanctions.

      Focusing on farm exports can be misleading. Total exports have fallen pretty dramatically since the war began:


      Russia has lot of land, some of which was taken out of farm production during what your link calls the “transition”. It’s being put back into poduction. Weather has been kind. So Russia is taking a bigger share of the farm commodity market, to go along with its already heavy reliance on mineral commodity exports. The development literature isn’t particularly rosy for raw commodity producers. Your link indicates Russia isn’t likely to export value-added farm commodoties, just as it doesn’t sell much in the way of value-added mineral commodities. Even Venezuela sells refined products, though their refinery is in Trinidad.

      If Russia can manage to avoid screwing up, it has chance to feed a big part of the world. That much is clear. When is the last time Russia managed to avoid screwing up?

    1. pgl

      “The Capital flight has stopped.”

      Because some RT moron like you said so? Is Jotta code for JohnH as you seem to be a Putin poodle and a dumb one at that.

      1. JohnH

        Yet more frivolous and mendacious drivel from Peppa Pgly, who can’t be bothered with citing data to refute others’ points.

        1. Macroduck

          When data are cited, your ignore them, distort them, tell made up stories to obscure the obvious implication of the data. Now you insist on data?

          1. pgl

            If Jonny boy aka Jotta read the link in Dr. Chinn’s post – this lying moron would see the data on how foreign direct investment has turned negative. Then again Jonny boy and his Mary Rosh has no clue what that meant.

        2. pgl

          So you were posing as Jotta, which explains the stupid lies he wrote. You are nothing more than a pathetic joke.

        3. pgl

          “Without ready access to these key drivers of long-term growth (including FDI, which has been net negative since February 2022, Figure 6)”

          Look at figure 6 you little pathetic lying moron – there’s the data in plain sight. Oh right neither nor you Mary Rosh knows what this figure is showing. Yea – you are dumber than a rock and so is Jotta.

  2. James

    Russia’s primary product was natural gas piped to Europe. The Europeans have successfully switched to LNG and increasingly renewable – solar and wind. (Notice how there are no reports of shortages in Europe this winter.) And no investors are willing to help Putin construct LNG facilities or build pipelines to India and China, when those facilities will just be taken by a Russian oligarch. Putin has destroyed the Russian economy.
    Putin has also destroyed the Russian workforce for decades (300,000+ killed/wounded so far and estimated 500,000 to 1 million have left the country). And set the Russian economy to making tanks and artillery – so he can sit like a poisoned toad spitting terror attacks on schools and hospitals in Ukraine hoping that the GOP and Trump will help him out. Putin’s disregard for human life invites comparison to Stalin.
    Russia’s economy will drop out of the G10 this year. And, if he keeps going may drop out of the G20.

      1. pgl

        Gee I wish the clowns here would actually discuss NUMBERS. Hey Jonny boy – go look at that graph of energy export revenues as it does tell an interesting story. Yes Russia does export a lot of oil – DUH! But before Putin started those war crimes that get you off – they exported a lot of natural gas too. No more which was his simple point.

        So even your own graph shows total energy export revenue took a big hit. Which of course is going to make you limp and worthless until you get to see more Ukrainian women being raped by Russian soldiers.

        1. Ivan

          Yes the actual numbers show how much and where the squeeze on Russian hydrocarbon energy lies. Got to give points for finding an excellent and informative link – such a shame he couldn’t understand what was looking him right in the eye. A temporary recovery in Ural oil price has given a temporary recovery in oil revenue.


          Nothing to suggest that China and India is willing to give them Russia any big recovery in revenue

          1. JohnH

            Ivan said, “Nothing to suggest that China and India is willing to give them Russia any big recovery in revenue.” No, nothing at all–“Asia crude imports hit high as China, India gorge on Russian oil.”

            Plus, “India’s Imports of Russian Oil Averaged $84.20 per Barrel in October”

            It’s amazing how wishful thinking dominates so much of the Russia commentary here.

        1. JohnH

          Love it! James clearly stated that “Russia’s primary product was natural gas piped to Europe.” I refuted that with NUMBERS.

          So then our resident genius,Peppa Pgly, refutes a point about total energy exports that I didn’t make! His usual drivel…

        2. JohnH

          Noneconomist: “If you know the enemy and know yourself, you need not fear the result of a hundred battles.” –Sun Tzu

          But Noneconomist chooses to believe whatever nonsense people choose to spoon feed him about how weak Russia is and how great the most expensive military in the world is.

          1. Noneconomist

            JohnH our self styled anti war warrior, isn’t. He refuses to condemn the Russian invasion and the thousands of deaths and casualties that have resulted from it. Instead, he implores Ukrainians to “negotiate” with an autocrat and recognized war criminal whose territorial ambitions have been widely recognized.. Except, of course, by professional liars like JohnH who somehow believe parading around as an anti war savant will fool those who know better.
            JohnH could have done everyone a favor by not immersing himself in tangled webs replete with his own many deceptions. Liars with poor memories seldom recall all the falsehoods that eventually cause them to repeatedly stumble.
            That’s why JohnH often finds himself face down on floor wearing yet another pair of smoldering pants. And trying, unsuccessfully, to remember how he got there.

      2. Willie

        China and India are paying for oil at discounted rates and in their own currencies. Which Putin cannot use elsewhere. So he’s stuck with selling oil at a discount and getting paid for in chits he can’t spend. Doesn’t seem like a winner to me. But what do I know?

  3. Ivan

    Russia has become a war time economy where the resources are spend on war and GDP is driven by war spending rather than consumer (oligarch) spending. This is hurting the consumer/oligarch class, but that is such a small group of people that Putin has been able to keep them under control, for now. The big question is how to continue generating the money to fund the war. Even more important how to fund the rebuilding of Russian military forces as planned.

    Russia is ultimately a third world country in its political/economic structure. A large population of poor people barely making it, being controlled by a small number of very rich people who get their income from exploitation of resources and people. GDP not being driven as much by consumption as by resource exploitation – because there is no consumer class and even the indulgence of the rulers cannot drive a real consumer economy. Without hydrocarbons to provide huge export incomes, the Russian economy has nothing to keep the country from slipping down to third world status.

    The hydrocarbon export countries have no more than a decade (probably less) of big easy money, then they will be crushed by alternative energy and hydrogen. What they do with that last decade of easy money will determine their future. Russia will be wasting that on a decadent military adventure, that would be a huge loss for the country even if it succeeded in its wildest dreams. Imagine a “Greater Russia” consisting of Russia, Belarus and Ukraine. All it would come to was basically an even bigger failed state – now with a trillion dollar bill for trying to rebuild the destruction in Ukraine.

    The fundament of a first world industrialized country is the idea that a person can “make it” and be allowed to harvest the fruit of their own talent and hard work. That is what drives the individual to drive the innovation and productivity that drives the economy. Any country where people don’t have that idea will be condemned to a second or third world status – because their essential talent will either give up or leave the country. That goes for any kleptocracy including Russia.

  4. Not Trampis

    Mark Harrison over at Vox EU made a salient point a long time ago.
    Imports going to russia was struggling because of sanctions.
    I believe this is still the case.
    If so then it is still falling behind.

    1. Moses Herzog

      Are you doubting the quality of North Korean military equipment?? You know they achieved Six Sigma on artillery ammunitions, right??

  5. JohnH

    The good news here is that Russia forecasts seem to have returned to the realm of sobriety after the intoxication of the war-fueled frenzy of 2022, which forecast an implosion of the Russian economy.

    You have to recognize, however, that this is a US government document and may well be biased to paint an unduly pessimistic prospect. Nowhere is this more evident than the statistics on emigration, not net migration. Fact is, Russia still has a positive net immigration. While the net immigration rate has declined over the years, 2022’s figures were consistent with a long term trend, not a sudden spike.

    Besides, given Western hostility to all things Russian, where would the emigrants go?

    Excluding immigration also conveniently obscures the possibility that some of those highly publicized emigrants of 2022 may have quietly returned, either in 2022 or 2023.

    Let’s not disregard the possibility of Treasury’s cherry picking the data to paint a pessimistic picture of Russian prospects and a rosy one regarding the impact of US sanctions and other policies, which Treasury was very invested in.

      1. JohnH

        baffling said: “Russia has lost alot of technology workers” Is this substantiated by anything other than NATO and US press reports?

        From what I can see, Russia continues to develop, produce and deploy high tech weaponry. Just ask the Ukrainians who have borne the brunt of it.

        “The Rise of Russia’s Hi-Tech Military”

        Amazing at the amount of hearsay and wishful thinking here.

        1. Noneconomist

          Surprise? Anti war JohnH , who says he despises wasteful, futile wars, is excited by all that “high tech Russian weaponry.” The weapons used by Russian invaders to kill and maim civilians, including women and children.
          Asked repeatedly to condemn the invasion, this self styled man of peace will do no such thing.
          No, he’s too busy—like other Putineers—insisting his hero, the world’s current #1 war criminal, has earned a negotiated war settlement that will award him deserved territory in Ukraine.
          JohnH would like nothing better than to be seen as a righteous truth teller, not realizing that congenital liars don’t qualify.

        2. pgl

          You meant to write “substantiated by anything other” FACTs. After all – the other truth in your little world are the lies Putin feeds you.

        3. pgl

          June 26, 2019

          The date of your link. Something else you did not read. Dude – it is 4.5 years later. Another episode of Jonny boy being too stupid to read his own link.

        4. baffling

          hey idiot, i said technology workers. not high tech weapons producers. and yes, this has been documented extensively. stop lying and trying misdirection johnny. russia has lost a lot of technology workers. it will damage their economy for a generation. young folks will either die in the war, or have already left. the educated russians are leaving if at all possible, because the future in russia, especially under putin, is very bleak.
          johnny, you keep advocating for the genocide of the ukrainian people by putin. why? what kind of monster raised you to be such a terrible person?

    1. pgl

      I see you did not read the post or the links as you continue to write stupid BS. Same old Jonny boy aka Jotta.

  6. pgl

    A lot of detailed examination to support this paragraph – all of which lying JohnH will try to nitpick with his stupid trash;

    ‘There are three major forces acting in concert upon the Russian economy: the war itself, U.S. and partners’ sanctions and related measures, and the Russian government’s policy response to those measures. As a result of these forces, the Russian economy is reorienting away from private consumption and towards defense spending at the expense of Russian citizens, who will face a long-term decline in living standards.”

    Yes the guns and butter issue which of course little lying Jonny thinks applies to only the US but not Russia.

    1. JohnH

      Agreed…”A lot of detailed examination to support this paragraph.” And how much important information got left out in order to sell the notion that the US is making progress in UKraine? And make no mistake, Treasury has a vested interest in selling the success of selling its policies.

      1. baffling

        putin has an even greater vested interested in selling the success of russia and the failure of ukraine. even if it is not true. but johnny does not even consider to raise that issue. his is silent on it. why? johnny is a putin troll.

      2. Macroduck

        Johnny? Johnny, the U.S. isn’t in Ukraine. Russia is.

        You keep trying to slip that lie into the conversation. The U.S. is supporting Ukraine against Russia’s illegal invasion, but the U.S. isn’t “in” Ukraine.

  7. Macroduck

    Across 178 countries, the average GDP per capita (in constant 2010 dollar terms) is $15,308. For Russia, that number is $10,079:


    That puts Russia 52nd in the world:


    That figure would be much worse if the Russia’s dependency ratio weren’t so low.


    When you take a gander at Russia’s demographic pyramid, you see why the dependency ratio is so low:


    Not many kids, and not many old people. The death rate exceded the birth rate during early Covid, and hasn’t improved much. The average age at death is 71 years. The “not many kids” problem is being exacerbated by the death and immigration of young men due to the war.

    So that’s Russia – Low productivity, low birth rate, short average life span, run by oligarchs who sometimes also have short life spans, collapsed empire. Russia imports less food now than in the past. Woo Hoo! What an accomishment for a country with the world’s largest land mass! Solution? War with Ukraine. That ought to fix things.

    1. JohnH

      What’s Tricky Ducky’s point? The per capita GDP of Iraq and Afghanistan are a fraction of Russia’s…and the Coalition of the Willing supported by the most expensive military in the word couldn’t defeat either…and neither Iraq and Afghanistan had a domestic arms industry, much less a world class one.

      1. Macroduck

        My point? The post on which I’m commenting is about Russia’s economy. So I compared Russia’s economy to the rest o the world. Was that over your head?

        And, by th, way, what’s your point? That the only reason to have an economy is to go to war? That’s not how I see the world, but it does seem consistent with how your hero, Putin, see things.

  8. JohnH

    “Real wages in Russia rose by 7.2% year-on-year in September 2023, decelerating from a 9.5% increase in the prior month and missing market expectations of 9% growth. It marked the 12th consecutive month of real wage increases…”

    Interestingly enough, the Treasury report doesn’t mention wages at all! And I thought that sanctions were designed to hurt ordinary people so much that they would overthrow the government (not that it happens much!)

    I would call another example of the Treasury cherry picking the data to make the situation look worse than it is, but I recognize that economists usually don’t take wages into consideration except to blame labor for inflation.

    1. Macroduck

      Funny how Johnny keeps casting aspersions at the U.S. Treasury, but takes data from Putin’s Federal State Statistical Service at face value. Putin would never insist on lies from his bureaucracy, right? What with all of Russia’s press freedom, that would never work.

      But heck, let’s allow Johnny to keep his blinders on. A 7.2% gain in real wages on per capita income that’s below the global average leaves Russia…below the global average. Quite far below, in fact. Yay, Russia.

      Oh, and just in case anyone missed Johnny being a complete hypocrite, here’s how Russia’s wages would increase in current circumstances. Russia has lost at least 300,000 working age men in its war against Ukraine. Another 500,000 have fled the country. Conscription has taken hundreds of thousands more. The result is a tighter labor market. Johnny has assured us repeatedly that a tight labor market, in itself, can’t raise wages. He keeps inssting while ignoring the evidence he has been shown – while demanding to be shown evidence.

      So clearly, in Johnny’s world, Russia is a worker’s paradise, while the U.S. is a hellhole. Sure, Johnny.

      1. Macroduck

        Rats! That was supposed to be “casting asparagus”! Will auto-correct never give me a moment’s rest?

      2. JohnH

        Actually, Tricky Ducky…Treasury used information from Russia’s Federal State Statistical Service to cherry pick their emigration figures, which they also massaged.

        1. Macroduck

          Avoiding my point, Johnny?

          You keep suggesting that the U.S. Treasury is untrustworthy, but put compete faith in Russia’s data. I call you on it, and you weasel away from answering.

          More of your “narrative”, I suppose. The government of a country with a free press is untrustworthy. A government which arrests journalists, shuts down press outlets and dictates language to the press is trustworthy.

          Anybody else notice how Johnny has gotten back to disrupting every exchange, spinning and weaseling and misleading? It’s as if someone told him to get back to work. Or maybe he got a fresh batch of Putin treats.

    2. pgl

      So Russian workers are now making what – $2 an hour. Dude multiply zero by any number you wrote – you have zero. Which of course is way above your IQ.

  9. Bruce Hall

    Russia is hardly an economic power even though its GDP is 8th largest in the world (2022) just slightly ahead of Canada, but with a per capita income of just over 1/4 Canada’s (much like China’s). https://www.worlddata.info/largest-economies.php

    It relies on exporting :
    Mineral fuels including oil: US$348.3 billion (69.5% of total exports)
    Iron, steel: $21.5 billion (4.3%)
    Fertilizers: $17.4 billion (3.5%)
    Gems, precious metals: $16.9 billion (3.4%)
    Aluminum: $10 billion (2%)
    Wood: $8.6 billion (1.7%)
    Fish: $7.8 billion (1.6%)
    Cereals: $7.24 billion (1.4%)
    Copper: $7.16 billion (1.4%)Ezoic
    Inorganic chemicals: $5.8 billion (1.2%)
    …which is hardly diverse or dynamic.

    The only reason the world pays much attention to it is its gigantic storehouse of nuclear weapons, which is a pretty significant reason. Even China, which would love some of that territory in eastern Russia, knows you don’t mess with the bear militarily so it has been trying to lock them into economic dependence (just like it has done with many third-world countries).

    But China isn’t sufficient to provide Russia with significant economic growth or resilience as a materials supplier because it is unlike China that has made itself into a finished product machine for the world and can use its almost unlimited semi-slave labor to its advantage.

      1. Bruce Hall

        Merry Christmas, pgl. Hope Santa brings you a new attitude. But I’ll repeat the link I provided before, which you failed to read, as your present.

        The point, dear pgl, is that although Russia has the 8th largest economy (per my link), it doesn’t have a lot of growth potential. You’re welcome.

  10. Macroduck

    In other news, poll workers Ruby Freeman and Shaye Moss asked for $24 million each from Rudi Giuliani in their defamation case against him – a total of $48 million. The jury has granted the $48 million, plus another $100 million for good measure:


    Remember Alex Jones? He has just offered $55 million to settle his $1.4 billion defamation judgement. The $55 million offer is to be paid over 10 years:


    InOctober, Jones was told he couldn’t use bankruptcy to avoid paying his victims:


    Meanwhile, InfoWars wants to start paying him again:


    And Elon thinks Alex is just dandy, allowing him back on the twit.

    So maybe Rudi will be OK in the end.

Comments are closed.