Recent trade and financial sanctions have reshaped Russia’s economic landscape. Russia’s gross domestic product and industrial output are showing moderate growth—around 2.5 and 3 percent, respectively—largely driven by strong wartime government spending, officially estimated at roughly 10 percent of GDP in 2022–23. However, this fiscal push has also fueled inflationary pressure: the rouble’s value dropped by about 30 percent from January to October, prompting a series of interest rate hikes to 13 percent in an attempt to stabilize prices.
Meanwhile, export revenues have declined due to global energy price shifts and the EU’s embargo on Russian oil, leading to a 32 percent drop in outbound shipments. At the same time, import volumes have partially recovered, rising by 17 percent as businesses find new ways to bypass restrictions. While around one-third of prewar EU exports to Russia are now fully sanctioned, various exemptions and alternative suppliers—particularly in China, Turkey, and parts of Central Asia—have helped offset some of the losses. These substitutions, however, come with additional costs and logistical difficulties, leaving Russia’s industrial plants operating closer to their limits.
Despite persistent labor shortages caused by mobilization and demographic shifts, some manufacturing sectors, particularly defense-related production, have seen a resurgence, while construction activity, including military infrastructure projects, remains steady. However, the authors stress that such growth relies on high public spending, industrial capacity already pushed to its limits, and restricted access to modern Western technologies. In the long run, they caution that continued conflict and sustained sanctions could deepen Russia’s structural economic challenges, leading to an overreliance on military-driven demand and potential stagnation once extraordinary wartime expenditures subside.
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