From BOFIT today (translated by Google):
GROWTH IN TOTAL PRODUCTION HAS DECLINED IN RECENT MONTHS
According to the monthly estimate published by the Russian Ministry of Economy, the annual growth of Russia’s GDP has clearly slowed down in recent months. The indicator describing the development of the five main production sectors of the statistics agency Rosstat suggests that the (seasonally adjusted) amount of production has turned to a slight decline.In January, the (seasonally adjusted) production of both the extractive industry and the processing industry remained at almost the same level as in recent months. Likewise, the amount of retail sales has remained almost unchanged for several months. The long-standing growth in construction also seems to have frozen in January.
Here’s the relevant graph:
Source: BOFIT (3/14/2024).
The article will be available in English tomorrow.
Back in February, Reuters noted:
Russia’s Centre for Macroeconomic Analysis and Short-term Forecasting (CAMAC) attributes around 60-65% of increased industrial output in the last two years to the Ukraine conflict.
…
The IMF, whose 2.6% prediction exceeds that of Russia’s own economy ministry at 2.3%, said the country’s tight labour market had supported wage growth. Real wages have now started falling, CAMAC said.
“Inflation is too high and companies’ financial position is no longer secure enough to quickly raise wages even in the face of a pronounced labour shortage,” CAMAC economists wrote.
With real disposable incomes, the situation is worse, they said, with pensions and benefits not quite indexed to inflation, which stood at 7.4% in 2023 after an 11.9% reading in 2022.
Unemployment is at a record-low 2.9%, with hundreds of thousands of people having fled Russia or joined the military in the past two years.
According to Rosstat, Russia’s labour productivity index, one of Putin’s key national development goals, fell 3.6% year-on-year in 2022, its steepest annual fall since the aftermath of the global financial crisis in 2009.…It may be too early to talk of recession, said CAMAC experts, but there are signs the economy is starting to stall, in sectors such as car production and construction.
The IMF expects Russian growth to fall to 1.1% next year, well below the world’s advanced and developed economies.
“I don’t see current economic growth as lasting or qualitative,” said Nadorshin. “I see it as a harbinger of an approaching economic crisis, perhaps the first since 2004, which may not even need an external shock.”
Couple of thoughts –
“…Russia’s labour productivity index, one of Putin’s key national development goals, fell 3.6% year-on-year in 2022, its steepest annual fall since the aftermath of the global financial crisis in 2009.” The shortage of workers should, all else equal, push productivity higher. A decline in productivity suggests either a shift in output composition toward less productive sectors or a sort of swiss cheesing of the economy as a result of people leaving the workforce. Maybe some of both.
“The indicator…suggests that the (seasonally adjusted) amount of production has turned to a slight decline.” “It may be too early to talk of recession, said CAMAC experts…” The claim that it’s too early to talk of recession looks like Google being too literal. Too early to speak of this or that in the standard U.S. idiom means the odds are insufficient high to spend time speculating; clearly, that’s not the case here. A slight decline in production is well into a situation in which speculating about recession is expected. I’m guessing the Russian idiom is different.
Consider Yevgeny Nardoshin’s “I see it as a harbinger of an approaching economic crisis, perhaps the first since 2004, which may not even need an external shock.” See? Time to talk about recession.
Heh, Menzie. Love you like a brother. Those last 2 sentences there are PRETTY negative on Russia, Now……. Didn’t we go over this before within the very CLEVER woman who is Head of Russia’s Central Bank??? I HOPE you are right Menzie. But I am not “going to Vegas” against this clever/sharp woman.
Your Bro to the end,
Uncle Moses.
I think it doesn’t matter how clever she is – reality always poke its way through. Most smart productive people don’t want to live in an autocratic kleptocracy – even fewer want to die for it. Russia has a GDP per capita that is 1/5’th of the US. All dictators fu** their country first, and then themselves. That one remaining CLEVER woman in Russia cannot do anything about that.
Ivan, as I stated above I HOPE you and Menzie are right. But honest to God, This woman, the head of Russia’s Central Bank, has been pretty amazing, yes??? I recall some people here on this blog calling me “sexist”. I can assure you I rest my laurels on gender with this woman. Uuuuuhh, she does have her fingers on two or three buttons of the Russian economy, I’m not predicting the results. Just saying I would not bet against her, because if you had bet against her these last 2–3 years, the Vegas hotels would be “comping” you and asking you to stay in Vegas as long as you liked, presuming your bank account had so much as $1 left.
“Sanctions: to Russia with Love” Jaimie Galbraith explains how sanctions cut Europe off from cheap imports it really needed in return for cutting Russia off from imports it really didn’t need and could substitute for with domestic production. https://www.ineteconomics.org/perspectives/videos/sanctions-to-russia-with-love
You have to admire the brilliance of the foreign policy blob and its stable of neocon economists who couldn’t bother to think through how Russia differs from small economies like Cuba…
Shorter Galbraith – Russia’s crony capitalism under the oligarchs and disdain for its own citizens means the war criminals and crony capitalists are not the ones being hurt by the sanctions or the military Keynesianism.
Oh wait – that was not Jonny boy’s preferred message. Oh my. Now it is what Galbraith said but of course little Jonny boy did not listen to his own link – once again.
Estimated 400,000+ Russian dead/casualties in Ukraine War, 1,000,000+ estimated of working age Russians have emigrated to other countries to avoid being thrown into the slaughter, and switching an estimated 30% of GDP into making artillery shells so Putin can turn eastern Ukraine into a rubble-filled charnel house – will have an impact on the Russian economy.
But yet – Trump and the MAGA cult tell me criminal/child abductor Putin is a strong dictator and Tucker tells me that you can buy caviar for cheap in Russia – if you can convert U.S. dollars into rubles which last time I checked were exchanging at 100 rubles to the dollar.
BTW – things are not looking good for Russian economy if we go by demographic trends – they have already dropped out of the top 10 countries by GDP and in coming years may drop out of the top 15. Putin is doing worse than the Soviet Union – he grew up in – his kleptocracy has been a complete disaster for Russia, No wonder why criminal Trump likes him so much.
The long term disaster will be worse than the short term pain. Although Europe has been cut off from cheap Russian hydrocarbons, that has also forced them to build up alternative energy and energy efficiency at a much faster pace. At the other side of that rough spot, Europe will have reliable, endless and cheap sources of energy -with no political hazards attached. For Russia the other side of that transition is a lot of black gold turned into black waste. The whole driver of their kleptocracy was hydrocarbon wealth, what will they have to substitute that?
The next decade will be the last where large sums of money can be extracted from hydrocarbons in the ground. Obama and Biden brilliantly made sure US got deep into that final black gold party – and in the process has pushed bad actors like Russia, Iran and Venzuela to the periphery. Putin has trapped Russia into wasting that last precious trillion of black gold on a doomed military adventure rather than on building an alternative economic driver for his country.
“The long-standing growth in construction also seems to have frozen in January.”
If construction includes naval vessels, this sector will need a big boost after all those ships Ukraine destroyed.