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Ukraine news: Russia’s economy, Putin tests one year on



Western sanctions have hit Russian banks, wealthy individuals and technology imports. But after a year of far-reaching restrictions aimed at degrading Moscow’s war chest, economic life for ordinary Russians doesn’t look all that different than it did before the invasion of Ukraine.

There’s no mass unemployment, no plunging currency, no lines in front of failing banks. The assortment at the supermarket is little changed, with international brands still available or local substitutes taking their place.

Crowds might have thinned at some Moscow malls, but not drastically. Some foreign companies like McDonald’s and Starbucks have been taken over by local owners who slapped different names on essentially the same menu.

“Economically, nothing has changed,” said Vladimir Zharov, 53, who works in television. “I work as I used to work, I go shopping as I used to. Well, maybe the prices have risen a little bit, but not in such a way that it is very noticeable.”


Russia’s economy has weathered the West’s unprecedented economic sanctions far better than expected. But with restrictions finally tightening on the Kremlin’s chief moneymaker — oil — the months ahead will be an even tougher test of President Vladimir Putin’s fortress economy.

Economists say sanctions on Russian fossil fuels only now taking full effect — such as a price cap on oil — should eat into earnings that fund the military’s attacks on Ukraine. Some analysts predict signs of trouble — strained government finances or a sinking currency — could emerge in the coming months.

But other economists say the Kremlin has significant reserves of money that haven’t been hit by sanctions, while links to new trade partners in Asia have quickly taken shape. They say Russia isn’t likely to run out of money this year but instead will face a slow slide into years of economic stagnation.

“It will have enough money under any kind of reasonable scenario,” Chris Weafer, CEO and Russian economy analyst at the consulting firm Macro-Advisory, said in a recent online discussion held by bne IntelliNews.

Russia will keep bringing in oil income, even at lower prices, so “there is no pressure on the Kremlin today to end this conflict because of economic pressures,” he said.

As the economy teeters between sanctions and resilience, what everyday Russians can buy has stayed remarkably the same.

Apple has stopped selling products in Russia, but Wildberries, the country’s biggest online retailer, offers the iPhone 14 for about the same price as in Europe. Online retailer Svaznoy lists Apple AirPods Pro.

Furniture and home goods remaining after IKEA exited Russia are being sold off on the Yandex website. Nespresso coffee capsules have run short after Swiss-based Nestle stopped shipping them, but knockoffs are available.

Labels on cans of Budweiser and Leffe beer on sale in Moscow indicate they were brewed by ABInBev’s local partner — even though the company wrote off a stake in its Russian joint venture and put it up for sale. Coke bottled in Poland is still available; local “colas,” too.

ABInBev says it’s no longer getting money from the venture and that Leffe production has been halted. Wildberries and Svyaznoy didn’t answer emails asking about their sourcing.

But it’s clear goods are skirting sanctions through imports from third countries that aren’t penalizing Russia. For example, Armenia’s exports to Russia jumped 49% in the first half of 2022. Chinese smartphones and vehicles are increasingly available.

The auto industry is facing bigger hurdles to adapt. Western automakers, including Renault, Volkswagen and Mercedes-Benz, have halted production, with sales plunging 63% and local entities taking over some factories and bidding for others.

Foreign cars are still available but far fewer of them and for higher prices, said Andrei Olkhovsky, CEO of Avtodom, which has 36 dealerships in Moscow, St. Petersburg and Krasnodar.

“Shipments of the Porsche brand, as for those of other manufacturers, aren’t possible through official channels,” he said. “Whatever is on the market is scattered offerings of cars that were imported by individual persons or through friendly countries by official channels.”

Unlike European automakers, some corporations are far from bailing.

While 191 foreign companies have left Russia and 1,169 are working to do so, some 1,223 are staying and 496 are taking a wait-and-see approach, according to a database compiled by the Kyiv School of Economics.

Companies are facing public pressure from Kyiv and Washington, but some have found it’s not so easy to line up a Russian buyer or say they’re selling essentials like food.

Moscow residents, meanwhile, have downplayed the impact of sanctions.

“Maybe it hasn’t affected me yet,” 63-year-old retiree Alexander Yeryomenko said. “I think that we will endure everything.”

Dmitry, a 33-year-old who declined to give his last name, said only clothing brands had changed.

“We have had even worse periods of time in history, and we coped,” he said, but added that “we need to develop our own production and not to depend on the import of products.”

One big reason for Russia’s resilience: record fossil fuel earnings of $325 billion last year as prices spiked. The surging costs stemmed from fears that the war would mean a severe loss of energy from the world’s third-largest oil producer.

That revenue, coupled with a collapse in what Russia could import because of sanctions, pushed the country into a record trade surplus — meaning what Russia earned from sales to other countries far outweighed its purchases abroad.

The boon helped bolster the ruble after a temporary post-invasion crash and provided cash for government spending on pensions, salaries and — above all — the military.

The Kremlin already had taken steps to sanctions-proof the economy after facing some penalties for annexing Ukraine’s Crimea peninsula in 2014. Companies began sourcing parts and food at home and the government built up huge piles of cash from selling oil and natural gas. About half of that money has been frozen, however, because it was held overseas.

Those measures helped blunt predictions of a 11% to 15% collapse in economic output. The economy shrank 2.1% last year, Russia’s statistics agency said. The International Monetary Fund predicts 0.3% growth this year — not great, but hardly disastrous.

The big change could come from new energy penalties. The Group of Seven major democracies had avoided wide-ranging sanctions against Russian oil for fear of sending energy prices higher and fueling inflation.

The solution was a $60-per-barrel price cap on Russian oil heading to countries like China, India and Turkey, which took effect in December. Then came a similiar cap and European embargo on Moscow’s diesel fuel and other refined oil products last month.

Estimates differ on how hard those measures will hit. Experts at the Kyiv School of Economics say Russia’s economy will face a “turning point” this year as oil and gas revenue falls by 50% and the trade surplus plunges to $80 billion from $257 billion last year.

They say it’s already happening: Oil tax revenue fell 48% in January from a year earlier, according to the International Energy Agency.

Other economists are skeptical of a breaking point this year.

Moscow could likely weather even a short-term plunge in oil earnings, said Janis Kluge, a Russian economy expert at the German Institute for International and Security Affairs.

Even cutting Russian oil revenue by a third “would be a severe hit to GDP, but it would not bankrupt the state and it would not lead to a crash,” he said. “I think from now on, we are talking about gradual changes to the economy.”

He said the real impact will be long term. The loss of Western technology such as advanced computer chips means an economy permanently stuck in low gear.

Russia may have successfully restarted factories after the Western exodus, “but the business case for producing something sophisticated in Russia is gone, and it’s not coming back,” Kluge said.


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Your Saturday UK Briefing: Brighter Days Ahead for Economy, Sunak – Bloomberg



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Your Saturday UK Briefing: Brighter Days Ahead for Economy, Sunak  Bloomberg


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Charting the Global Economy: Fed, BOE, SNB Push Ahead With Hikes



(Bloomberg) — The Federal Reserve, Bank of England and Swiss National Bank all proceeded with expected interest-rate increases this week, reinforcing their commitments to curb inflation despite turmoil in the banking sector.

Policymakers in the US and UK hiked by a quarter point while those in Switzerland opted for a half point. All three signaled more increases could be in store.

The UK was especially under pressure to tighten policy after a report earlier in the week showed consumer prices advanced 10.4% in February, surpassing all estimates in a Bloomberg survey and bucking economists’ expectation of a slowdown.

Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:



Iceland’s central bank extended western Europe’s longest policy-tightening campaign with a full percentage-point increase, while the Philippine central bank shifted to a smaller hike. Norway, Taiwan and Nigeria also kept hiking. Officials in Turkey left rates unchanged, as did those in Brazil despite pressure from the government for looser policy.

The rush of layoffs that began late last year isn’t letting up, marking the worst start to a year since 2009, with nearly 52,000 jobs lost in one week in January alone. Since Oct. 1, executives across sectors have sacked almost half a million employees around the world, according to a comprehensive review of layoffs by Bloomberg News.


History remembers Paul Volcker as the slayer of inflation, and Ben Bernanke as the crisis firefighter. Jerome Powell is in danger of having to play both roles at once — or, what may be worse, to choose between them.

Powell and his colleagues are expecting a sharp dropoff in economic activity through the rest of 2023 — at least, that’s the implication from new economic projections they published this week.

Rent increases for US single-family homes eased for a ninth straight month in January, pushing the annual rate to the lowest since the spring of 2021, according to CoreLogic. All 20 major metro areas tracked by CoreLogic posted single-digit annual rent increases, for the first time since late 2020.


UK inflation accelerated unexpectedly in February for the first time in four months, keeping the BOE on course to raise interest rates. Food and non-alcoholic drink prices soared 18%, the fastest pace in 45 years, while core and services inflation also picked up.

Euro-zone economic growth continued to pick up in March, driven exclusively by the service sector as concerns over energy supplies recede. The overall rate of expansion rose to the highest level in 10 months, according to business surveys by S&P Global.


China’s population is emerging from a massive virus wave unleashed by the rapid reversal of Covid Zero in mid-December. People are planning trips, dining out and returning to shopping malls. Still, residents of the world’s second-biggest economy aren’t splashing out like they used to.

South Korea’s early trade data showed a deepening slump in exports as global demand for semiconductors remains weak and China’s reopening is yet to generate any boost.

Singapore’s core inflation, a key barometer for the central bank, kept its 14-year-high pace in February as officials weigh fresh threats to the global economy amid the Federal Reserve’s resolve to stay the course on tightening.

Emerging Markets

Sri Lanka clinched a $3 billion bailout loan from the International Monetary Fund after six months of negotiations. Now comes the harder part: getting a debt restructuring agreement and seeing through monetary policy and tax reforms.

—With assistance from Mathieu Benhamou, Ruchi Bhatia, Matthew Boesler, Libby Cherry, Jo Constantz, Jennah Haque, Jinshan Hong, Michelle Jamrisko, Sam Kim, Phil Kuntz, Karen Leigh, Rich Miller, Tom Rees, Zoe Schneeweiss, Naomi Tajitsu, Alex Tanzi, Kevin Varley, Alexander Weber and Karl Lester M. Yap.


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Euro-Area Economy Strengthens More on Service-Sector Surge – Financial Post



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(Bloomberg) — Euro-zone economic growth continued to pick up in March, driven exclusively by the service sector as concerns over energy supplies recede.

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The overall rate of expansion rose to the highest level in 10 months, according to business surveys by S&P Global. Manufacturing output broadly stagnated, however, only supported by a backlog of orders as demand continued to fall.


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“Growth has been buoyed since the lows of late last year as recession fears and energy market worries fade, inflation pressures ease and the unprecedented supply chain delays seen during the pandemic are replaced with record improvements to supplier delivery times,” said Chris Williamson, an economist at S&P Global.

Sentiment in Europe has been improving as it became clear that the region would avoid worst-case scenarios for access to natural gas predicted after Russia cut off supplies to the bloc. Recent turmoil in the banking sector has cast some doubt on how the global economy will develop, though European officials have sounded confident that the sector can withstand any fallout.

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While activity improved in both Germany and France, the strongest performance came in the rest of the 20-nation euro area.

What Bloomberg Economic Says…

“The euro-area composite PMI survey for March suggests the economy is beginning to emerge from a period of stagnation and holding up well under the weight of higher interest rates. While monetary policy works with long and variable lags and choppy waters may still lie ahead, the resilience of the economy should allow the hawks at the European Central Bank to succeed in pushing for more interest rate increases”

—David Powell, economist. For full analysis, click here

Inflation is still running far above the European Central Bank’s 2% target, however, with underlying data becoming the key focus for policymakers. While price gains continued to moderate in March, they remain elevated by historical standards, according to S&P Global.

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“Such stubborn inflationary pressures, fueled primarily by the service sector and rising wage costs, will be a concern to policymakers and suggests that more work may be needed in terms of bringing inflation down to target,” Williamson said.

The jobs market also remained resilient. Employment growth reached a nine-month high, with acceleration seen especially in services in line with rising demand.

Firms’ confidence in the business outlook dipped, though it remained well above levels seen in late 2022. That could be linked to concerns over uncertainty caused by banking-sector stress and the impact of further increases in interest rates, S&P Global said.

The composite PMI reading for the UK edged lower to 52.2 in March from 53.1 the previous month, suggesting the economy has avoided a recession for now. British companies are the most confident they’ve been since the start of Russia’s invasion of Ukraine.

Data earlier revealed activity in Japan’s services sector edged up to the strongest in almost a decade as the return of Chinese tourists boosted demand. The US number due later on Friday is expected to be below 50.

—With assistance from Mark Evans, Joel Rinneby, Tom Rees and Zoe Schneeweiss.

(Updates with UK PMI data in 10th paragraph.)

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