Russia’s success in evading Western sanctions has helped its economy outperform expectations ahead of Vladimir Putin’s all but certain re-election on Sunday.
Ever since Russia’s invasion of Ukraine in February 2022, the Russian economy has consistently defied the dire predictions of critics.
That resilience appears to be holding firm as Russians head to the polls between Friday and Sunday for a presidential election that is set to ensure Putin’s rule until at least 2030.
At the start of the war, the International Monetary Fund expected a prolonged recession, forecasting the economy to contract by 8.5 percent in 2022 and 2.3 percent in 2023. While Russia’s economy did shrink in 2022, the contraction was just 1.2 percent, according to government figures. Last year, the economy officially grew 3.6 percent.
According to Castellum.AI, a global risk platform, Russia has been slapped with 16,587 sanctions since the start of the war – the majority of them against individuals. Some $300bn of Russian assets have been frozen.
Other restrictions apply to international debt markets and industrial imports. The most consequential sanctions limit natural gas exports and place a cap on Russian oil prices.
“I can’t say sanctions have had a big impact on me,” Nikolai Zlatarev, a Moscow resident who works in education, told Al Jazeera. “My weekly shop is a little more expensive and I buy more Russian brands. But I doubt that drinking Dobry Cola instead of Coca-Cola will change the election.”
Owing to high oil prices and elevated military spending, Russia has managed to mitigate much of the impact of sanctions. But the costs of prolonged conflict, and the possibility of yet more sanctions, look set to weaken output over the medium term.
Russia’s economy has performed better than expected since the invasion of Ukraine [File: Elena Chernyshova/Bloomberg via Getty Images]
“Extra spending unleashed by war can boost economic activity. But it also represents a redistribution of income away from state services towards the army,” Konstantin Sonin, a political economist at the University of Chicago, told Al Jazeera.
Military spending has swelled in recent years, rising from 3.9 percent of the gross domestic product in 2023 to about 6 percent in 2023 – the highest it has been since the collapse of the Soviet Union. This year, military expenditure is expected to account for almost one-third of government outlays.
Significant investment in military hard and software, together with welfare handouts for the families of soldiers killed in the war, have supported wage growth.
Meanwhile, Russia’s massive energy sector has kept money flowing into state coffers, while local companies have made substantial efforts to substitute Western imports.
“Import substitution always happens with trade restrictions,” Sonin said.
“Most critically, Russia has continued to sell plenty of fossil fuels. It’s true that oil and gas exports have fallen because of sanctions, but elevated prices have kept overall revenues high,” he said.
Sonin added that “it’s important to recall the size of Russia’s fossil fuels sector. Domestically, oil accounts for roughly one-third of tax receipts and half of all export revenue”.
The Kyiv School of Economics estimates that Moscow made $178bn from oil sales last year and that revenues could rise to $200bn in 2024 – not far off the $218bn earned in 2022.
In May 2022, the European Union agreed to cut 90 percent of its oil imports from Russia. Then, in December 2022, Australia and G7 members announced a price cap on Russian crude oil – known as Urals crude – aiming to squeeze Moscow’s finances even further.
Under the rules, non-G7 oil traders can only use Western ships and finance or insurance services provided they pay $60 per barrel, or less – well below the market-rate.
Russia’s massive fossil fuels sector has helped its economy withstand sanctions [File: Tatyana Makeyeva/Reuters]
But Russia has proved adept at countering these measures, according to Switzerland-based energy trader Mohammed Yagoub.
“Russia has built up a large ‘shadow fleet’, which are tankers with opaque ownership and no Western ties in terms of finance or insurance. In addition, Russia has found plenty of non-Western oil buyers at discount prices, China and India most notably,” Yagoub told Al Jazeera.
“Last month, the majority of Russian Urals were sold above $60. But, Western countries have been clamping down,” Yagoub added, pointing to a reported information request from the US Treasury to shipping companies suspected of violating the cap.
“Over the past year, the Kremlin’s been lucky. Western countries don’t want to snuff out Russian oil altogether, because a supply crunch would trigger global inflation. So, they’ve just chugged along much as they were before the war.”
Russia has also found ways to skirt import restrictions by sourcing goods from countries acting as intermediaries for Western goods. For instance, Serbia’s exports of phones to Russia rose from $8,518 in 2021 to $37m in 2022.
Some observers dispute the suggestion that the pressure campaign against Moscow has backfired.
“Sanctions are working,” Liam Peach, a senior emerging markets economist at Capital Economics, told Al Jazeera.
“It’s reasonable to assume that longer journey times for tankers [previously travelling to EU countries], together with high insurance premiums, have added roughly $30 a barrel to the cost of oil sales.”
“On top of elevated military spending, lower oil revenues will see the deficit widen to 3 percent this year, from 1.5 percent in 2023,” Peach said. “That will require scaling back on other areas of state spending, like healthcare and education, which will slow growth over time.”
Peach also pointed out that falling exports have led to sharp currency depreciations, making imports more expensive. To put a lid on rising prices, the Bank of Russia hiked interest rates by 8.5 percent in 2023, which will also slow economic activity.
The UK Ministry of Defence has estimated that more than 350,000 Russians have been killed or injured in the war in Ukraine. [File: Russian Defense Ministry Press Service via AP]
Elsewhere, Putin is grappling with a labour shortage aggravated by his military mobilisation efforts. The UK Ministry of Defence has estimated that more than 350,000 Russians have been killed or injured in the war.
Re: Russia, an analysis and policy network, has estimated that close to one million Russians, roughly 1 percent of the workforce, have emigrated since the invasion.
These losses have compounded looming demographic challenges as Russia’s birthrate was already below the replacement level of 2.1 before the war.
“The upshot is that economic growth will become more constrained on the supply side, and GDP will likely fall from around 3 percent this year to 1.5 percent by the end of the decade. National output will be particularly weak during periods of low oil prices,” Peach said.
“But I don’t think a gradual economic slowdown will be a big threat to Putin,” Peach added. “Russia has experienced its fair share of crises in recent decades. As long as inflation and the rouble remain broadly stable, low growth is unlikely to topple the government.”
For Zlatarev in Moscow, conditions remain far better than the widely remembered economic crises of the 1990s.
“Compared to then, things are OK. Even if the costs of this conflict are high, Putin is still viewed as a net positive,” he said. “Most people I know have said they’ll vote for him.”
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
