Russian Economy Expanding, Contrary to Europe’s
In issuing the first round of sanctions against Russia last February, the European Commission and EU governments assured us that it would force Russia to its knees and make war-financing impossible. We are now at the ninth round of sanctions, and the opposite has occurred: the Russian economy has expanded and EU economies are shrinking. A brief and partial overview:
Trade balance: Russia has a record surplus, while the EU is in deficit for the first time in history. In the first nine months of 2022, Russian exports grew by 32%, to $443 billion. This is higher than what the EU had forecast for the entire year 2022 ($380 billion, corresponding to a 31% drop). Conversely, the euro area announced a trade deficit of €26.5 billion in Oct. 2022, the 12th consecutive gap. This is mainly due to the energy boycott imposed by the EU as well as the insane green policy, which drove energy prices to stratospheric levels. As a result, the bill for imports skyrocketed in the EU, while revenues increased for Russia despite lower volume levels.
Inflation: Inflation in Russia in December was 12%, lower than the previous month but still higher than the Eurozone’s average of 10.1%. But compared to individual countries, Russia fares much better than several EU member countries: Croatia 13.5%, Slovakia 15.4, Czech Republic 16.2, Romania 16.76, Bulgaria 16.9, Poland 17.5, Estonia 21.3, Latvia 21.8, Hungary 22.5, Lithuania 22.9.
Manufacturing: Russia’s PMI index (indicating manufacturers’ expectations) was, at 53, the highest in the world in December, a score above 50 representing positive growth. The same index was at 48.5 in the U.S. and 47.8 in the Eurozone.
GDP: Official GDP data show a minus 2.5% for Russia in 2022, i.e., an extremely mild recession for a country at war. For the euro area, GDP officially stagnated in 2022. This looks like the EU is performing relatively better, but Western GDP figures are notoriously inflated by financial values, whereas the weight of the physical economy is larger in Russian GDP. And forecasts for 2023 are gloomy – guess for whom.