A man waves the Russian national flag as he arrives at the patriotic concert at the Red square in downtown Moscow ahead of Russia Day on June 11, 2023.KIRILL KUDRYAVTSEV/AFP/Getty Images
John Rapley is an author and academic who divides his time among London, Johannesburg and Ottawa. His books include Why Empires Fall (Yale University Press, 2023) and Twilight of the Money Gods (Simon and Schuster, 2017).
When Russia invaded Ukraine two years ago, the Western alliance rallied to both support Ukraine and isolate Russia. In addition to arming Ukraine and taking in refugees, Western countries took swift and decisive measures to cut the oxygen to the Russian economy: requiring their companies to close operations there, barring imports from Russia and preventing its ships from using their ports or insurance companies, and most importantly, blocking exports of the high tech needed in both Russia’s defence and energy sectors.
They intended to impede Russia’s ability to fund a long-term war, all while providing Ukraine the assistance it needed to repel the invasion. At first, the West looked triumphant. Not only did Ukrainian forces withstand Russia’s attempt to take Kyiv, but the Russian economy began contracting.
Two years on, though, things look very different. The Russian economy suffered a shallower recession than expected in 2022, and last year it bounced back. Whereas Western countries, in particular West European countries such as Germany that had depended on Russian energy imports, are floundering, Russia’s economic growth rate now rivals that of the U.S.
Meanwhile, far from being hobbled, its defence industry has managed to expand significantly. The country now produces three million artillery shells a year, almost three times the combined output of U.S. and European factories. Each day on the battlefield, it fires five times the number of shells as Ukraine. As Ukraine is bombed to rubble, its economy has imploded. After losing nearly a third of output in 2022, it remains far from recovery.
It goes without saying that reports of Russia’s economic demise proved premature. Several factors account for the country’s surprising resilience. First off, it put itself on a war footing. Defence spending shot up, such that over 7 per cent of the country’s economy is now committed to defence. This boost in demand, coupled with the fact that Russia is not directly affected by the war – Western allies insist Ukraine not use their weapons to target Russia directly, for fear of widening the war – has jolted the economy back to life.
Second, it found inventive ways around sanctions. After Western countries stopped exporting the computer chips used in modern weaponry, Russia started importing non-prohibited items, such as refrigerators, microwaves and dishwashers, then cannibalizing them for chips. Equally, it has maintained shipping by operating through shell companies that find ports willing to turn a blind eye, and has thereby maintained its trade. For many intermediary countries, especially in the developing world, sanctions-busting has become morally easier to justify since the outbreak of the Gaza war, given what they see as Western double-standards on who should be sanctioned.
Third, Russia found new markets for its exports. When Western countries cut their imports of Russian oil and natural gas, countries such as India and China happily stepped in to mop up supply. Admittedly, they did so at a cost to Russia, buying the products at a discount to the world price in such a way that they could observe the letter if not the spirit of the sanctions. India’s Energy Minister was thus able to recently say with a straight face that “the world is grateful to India for buying Russian oil,” since it has kept down oil prices on the world market.
Fourth, European countries softened the impact of sanctions on their own economies by trading with Russia through the backdoor. Western Europe’s trade with countries in Central Asia and the South Caucasus has taken off – German car sales to Kyrgyzstan suddenly rising some 5,500 per cent in one year, while Kazakhstan’s exports of electronic equipment to Russia increased 18-fold in the same period. It’s pretty clear what’s going on: European countries are trading with Russia through intermediaries.
Nevertheless, if Russia seems to have won its battle with the West, the future of its war still looks in doubt. Although it’s finding markets for its exports, the discounts it’s being forced to absorb mean that its revenues are less than they would otherwise be. All the while it is growing ever more dependent on trading partners, such as China and India, which aren’t doing it any favours. Beyond defence, Russia’s manufacturing and high-tech sectors, which it wanted to develop, are struggling. As a result, Russia is turning back into a Third World country.
Should the war drag on, Russia’s resource well will start to run dry, and the country will then find itself poorer and weaker than before. Vladimir Putin is gambling this won’t happen. He appears to reckon that Western electorates, softened by the easy life, will press their governments to cave on Ukraine, sue for peace and resume regular relations.
If he’s right, he’s headed for victory. But if he’s wrong, if Western countries dig in and support Ukraine over the long haul, Russia’s long-term prospects look grim.
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.
