Economy

How the Russian economy is defying and withstanding western sanctions

Published

2 years ago

November 20, 2022

Since Russia first invaded Ukraine in February 2022, western media has frequently suggested that economic sanctions against the Russians are going to stifle the war effort or even bring the country to its knees.

As recently as early November, for example, the Wall Street Journal reported that “mobilization, sanctions and falling energy prices” were hurting the Russian economy and that the economic outlook “bodes poorly for Vladimir Putin’s ability to fund Russia’s war in Ukraine.”

Credit agency Standard and Poor’s so-called Global Russia Services Purchasing Managers’ Index is a good example of the sort of data being used to argue that sanctions are now starting to really hurt Russia.

The data is based on information provided by Russian companies willing to talk to them. Consequently, the survey could be drawing on a distorted sample.

The impact of mobilization

Nonetheless, media coverage also contains Russian government and other Russian-sourced statistics that highlight some of the economic problems confronting the country. One example is the impact that the recent mobilization of reservists to fight in Ukraine has had on the Russian workforce.

The Russian daily Kommersant — a sort of Russian Financial Times — has reported that Russian companies have lost workers due to them either being drafted to serve in Ukraine or fleeing the country to avoid it.

According to both Kommersant and the Wall Street Journal, a third of Russian companies have reported being hit with war-related labour issues. But Kommersant also went on to report that half of the Russian companies affected were able to rapidly adapt to new circumstances.

A young man walks as another rides his bicycle toward the border crossing between Georgia and Russia at Verkhny Lars in September 2022 after Moscow announced a partial military mobilization in Ukraine.
(AP Photo)

It wouldn’t make much sense if Russia’s economy hadn’t been affected by unprecedented western sanctions and the wider burden of the war. But media coverage of western sanctions against Russia rarely mentions that western economies are also struggling, due in part to those measures — as Standard and Poor’s itself recently pointed out.

Is Russia actually faring any worse? In some key areas, no.

Positive indicators

Russia’s current economic situation has been helped by a bumper grain harvest this year. Russian agriculture has produced more than 150 million tonnes of grain in 2022, giving it enough to send some to Africa free of charge.

As in the West, Russians too have been facing high inflation in the double figures. But Russian pensions, the country’s minimum wage and salaries are keeping pace with inflation better, in some cases, than those in the West.

There is also evidence that in recent months, the Russian inflation rate has been dropping after spring highs.

There are other positive trends and areas in which the economic picture might improve for Russia, including the replacement of western products and companies with Russian equivalents.

Cooks barbecue meat for customers during a street celebration of Moscow City Day in Moscow on Sept. 11, 2022.
(AP Photo/Alexander Zemlianichenko)

Businesses quickly replaced

Western icons like McDonald’s may have pulled out of Russia, but some have been replaced. McDonald’s was bought out in Russia and renamed Vkusno i tochka — meaning “tasty, full stop” in English.

As someone who recently visited Russia, I can personally vouch from recent visits to Vkusno i tochka restaurants in both Murmansk and Moscow that they’re doing a brisk trade offering products that are essentially the same or very similar to McDonald’s standbys.

There’s been a lot of reporting in the West about how Russia is finding it difficult to obtain microchips for its weapons. What’s less frequently reported is the efforts the Russian government is making to try to deal with the problem.

Russia is working on ramping up its own production of microchips, though Russian media has also pointed out it’s facing an uphill struggle to be self-sufficient on this front. But even relatively easily sourced basic and older chips intended for consumer electronics can be used in the defence sector, as Russia adapts to new realities.

Many countries and companies may not be willing to adhere to sanctions on the sort of western technology that is being found in Russian weapons.

An under-estimated Russia?

The West seems to have under-estimated Russia’s ability to withstand sanctions and Russian acceptance and understanding of difficult economic times.

As one Russian recently remarked to me: “We know why we’re having to put up with inflation — do westerners?”

Russian support for Vladimir Putin’s leadership and the war in Ukraine remains high. Anecdotal evidence from my many conversations with Russians from all walks of life in both Moscow and Murmansk in late October and early November certainly support this.

Some university-educated younger Russians opposed to the war have left the country to avoid mobilization or to continue working for western companies that have left Russia. The absence of this group leaves Russians more committed than ever to the war, given that older citizens are more likely to support it.

Russians hold state flags and flags with the letter Z, a symbol of the Russian military, with the hashtag ‘we don’t abandon our own’ at a demonstration in Moscow in September 2022 on the eve of referendums in four Russian-held regions of Ukraine.
(AP Photo/Alexander Zemlianichenko, File)

In the face of recent Ukrainian battlefield successes, many Russians are finally waking up to the seriousness of the war in Ukraine.

Four Ukrainian regions have now been nominally incorporated into Russia. The Russian government slogan “we don’t abandon our own” seems to be resonating for many in Russia who view the war as being about the protection of a Russian-speaking minority in Ukraine.

Russia’s population as a whole is likely able to tolerate more economic hardship, given what Russians regard as being at stake. It remains to be seen if the same can be said for populations in western Europe that are also struggling under the weight of western sanctions.

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Economy

Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

Published

1 day ago

November 8, 2024

Anne Joseph

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.

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Economy

Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

Published

3 days ago

November 6, 2024

Anne Joseph

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.

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Economy

Trump’s victory sparks concerns over ripple effect on Canadian economy

Published

3 days ago

November 6, 2024

Anne Joseph

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.

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