As of this date, Russia is most widely known for a number of factors, such as its size, energy resources, political system, and complex relations with Western countries; however, the economy of Russia will be the main topic of this article. The main topic we will be looking into is: How is Russia’s economy performing right now? How large and powerful is Russia’s economy currently? How does it compare to other major nations? And why is Russia’s economy not as impressive as it seems?
To begin, Russia’s economic performance can be evaluated in both positive and negative conditions. Russia experienced positive growth in 2023, ranging from 0.7% (IMF) to 3.6%. Russia had a high energy export in oil and gas, which increased export revenue and helped it maintain a low unemployment rate. On the other hand, Russia’s economy is showing signs of deterioration, beginning with the impact of sanctions. Following the Ukraine war, western sanctions that restricted access to technology, finance, and markets had a significant impact on Russia’s economy. But, given its status as one of the world’s largest countries, is it performing well in comparison to others? Russia is one of the richest countries in terms of natural resources, including valuable and non-valuable metals, oil, and gas. As a result, Russia has abundant natural resources as well as a substantial military budget. Russia spends a large portion of its GDP on military expenditures, giving it significant military power. However, in the long run, while Russia continues to play an important role in the global economy and maintains a strong military presence, its economic power is under threat. The long-term consequences of sanctions, resource dependence, and domestic issues remain unknown. Russia still ranks lower on the leaderboard than large countries such as China and the United States.
So, why isn’t Russia’s economy as impressive as it appears? For instance, since Russia’s economy changed dramatically after the Soviet Union fell apart, from centrally planned to open to the rest of the world, the transition from a centrally planned to a market economy was gradual and continues to this day in some countries, such as China. On the other hand, Russia is not. Second, widespread corruption and inefficient institutions impede investment, stifle competition, and discourage entrepreneurship, which decreases economic potential. Next, excessive reliance on resources. While oil and gas generate significant revenue, they are unstable goods tied to price fluctuations and global shifts towards renewable energy. This makes the economy more vulnerable to external shocks and reduces expansion.
In summary, there are two main aspects to Russia’s economy that paint a complex picture at the moment: Russia saw some growth in 2023 as a result of increased government spending and high energy prices. Nonetheless, sanctions, capital flight, low diversification, and internal problems present serious obstacles. Then, uncertainty approaches. Long-term economic prospects are still very uncertain, heavily influenced by the Ukraine war, ongoing sanctions, and global energy market fluctuations.
This article is a part of the class “751309 Macro Economic 2”supervised by Asst. Prof. Napon Hongsakulvasu Faculty of Economics, Chiang Mai University
This article was written by Apichaya Poolpoka 651615063
Reference
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McHugh, D. (2023, September 25). How oil price hikes boost Russia’s war as drivers pay more for Gas. PBS. https://www.pbs.org/newshour/economy/how-oil-price-hikes-boost-russias-war-as-drivers-pay-more-for-gas#
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