Economy
Ukraine war: Russia's economy holding out against sanctions – DW (English)
In the dramatic days following Russia’s invasion of Ukraine one year ago, the Russian economy was seriously rattled.
Western allies, led by the United States and European Union leveled severe sanctions against the country’s financial system. The ruble fell to a record low against the US dollar, the Russian central bank doubled interest rates, and the Moscow stock exchange was shut for several days.
In a statement, EU leaders described “massive and severe consequences” for Russia. Economists predicted a huge plunge in GDP. Weeks after the sanctions were brought in, the White House said in a statement: “Experts predict Russia’s GDP will contract up to 15 percent this year, wiping out the last fifteen years of economic gains.”
It hasn’t happened. While the past 12 months have been very challenging for the Russian economy, it has performed far better than expected.
Getting a clear picture is ultimately impossible. The Kremlin made a lot of key economic data classified after it launched the war on Ukraine and it remains so today. The underlying shape of the economy is uncertain. However, it’s already obvious that the collapse many predicted has not materialized.
“I think we can say that the economy shrank a lot less than the 10 to 15% that people were talking about at the beginning of the war,” Alexandra Vacroux, executive director of the Davis Center for Russian and Eurasian Studies at Harvard University, told DW.
She believes Russian GDP fell by between 3% and 4% over the past 12 months. That’s broadly in line with estimates from the World Bank, the International Monetary Fund (IMF) and the Organisation for Economic Cooperation and Development (OECD).
Russia’s official statistics agency this week said the economy contracted by 2.1% in 2022, having predicted a contraction of 12%.
Panic in Moscow
Chris Weafer has worked in Russia for around 25 years as an investment advisor and strategist. He says there was a lot of genuine panic within Russia about the economy in the early months after the invasion. That was not only due to the sanctions but also because many companies were voluntarily leaving Russia.
“There was speculation that the loss of trade and logistic routes would hit manufacturing very hard and that one would have significant job losses. So around that time, I was definitely very pessimistic about the outlook for the economy in 2022,” he told DW.
However, he says, by May the picture was “improving rapidly.” “You could see that the worst-case predictions were not going to happen.”
Europe kept buying Russian energy for much of 2022
There are several reasons why the Russian economy has outperformed expectations. A major one is its hydrocarbons, namely oil and gas. The EU did not sanction Russian oil and gas imports in the early months of the invasion, as it was so dependent on them for its energy needs.
Europe continued to buy Russian oil and gas for much of 2022, while Moscow also found willing new energy trade partners in China, India and elsewhere. Earlier this month, the Russian central bank reported a record-high trade surplus of $227 billion (€211 billion) for 2022, largely driven by its colossal energy exports.
“Russia has been able to earn almost like windfall revenues from exporting those products at a very high level because traders in Europe not only continued to buy Russian products, but they started stockpiling them,” says Weafer.
That ‘windfall’ meant the Russian government was able to greatly limit the impact of western sanctions on its foreign reserves.
“It was able to use the money to provide subsidies for key industries, employment support, make sure it continued to fund not only the military but also social programs and to generally maintain economic and social stability in the country,” says Weafer.
That in turn has helped keep unemployment low, reportedly at around 4%, although that figure is significantly distorted by the fact that many people have left the labor force, either because they were drafted into the armed forces or because they left the country in the aftermath of the invasion.
Another factor that has helped keep the Russian economy going is that a majority of western companies continued to operate in the country once the initial clamor to exit the market faded.
Weafer says that while companies such as McDonald’s came under huge social media pressure to leave, most others rode out the storm. “Especially those that are important for the economy, such as big taxpayers or revenue generators or particularly big employers, they’ve been much, much slower to leave.”
Old sanctions, new markets
Another reason for the Russian economy’s robustness relates to the sanctions themselves. Vacroux says sanctions have consistently failed to live up to expectations in countries such as Venezuela, Iran and Russia itself.
“The fact is that sanctions are most effective right before you levy them,” she says. “When you have the threat and you say, if you do X, we’re going to sanction Y, and at that point, the actor stops to think, like, is it really worth doing X? And maybe the sanctions have an effect. But once Russia does Y — invades Ukraine — then you really have no more leverage.”
Then there is the fact that the Kremlin has been used to dealing with sanctions for almost a decade, since its annexation of Crimea in 2014.
The Russian central bank, well-versed in crisis management, took decisive action to shore up its financial system in February and March 2022. The interest rate hike helped prevent a run on banks as the country’s inflation rate eased gradually.
Weafer says a decade of sanctions means the country’s banks have been heavily stress-tested while the Russia has also become relatively self-sufficient in key industries, particularly in food production.
Another major factor driving Russia’s economic resilience is the strengthening of its trade ties with China and India. Trade between the countries has soared while Russia has also been able to increasingly benefit from so-called parallel imports, whereby western products are now finding their way into Russia again via third-party countries like China, India and others across central Asia.
Vacroux says China is “the big winner”, pointing out that while trade between the countries soared, so too has Moscow’s dependence on Beijing.
“China doesn’t really care about Russia,” she says. “It’s 3% of Chinese trade. But Russia now cares a lot about China. And the good thing about that for us is that when China says, ‘You cannot use nuclear weapons in Ukraine. Right, don’t do that,’ Russia really has to listen.”
2023: A different story?
Expectations for the Russian economy in 2023 vary. The IMF recently said it expected the country’s economy to grow by 0.3% in 2023, although others have forecast a GDP drop of around 2%.
Europe has managed to largely divest itself of its dependence on Russian energy over the course of the last 12 months. However, so far there is little evidence to suggest that the bloc’s price cap sanction on Russian oil — introduced in December — is working. According to research carried out by the Briish weekly The Economist, Russian crude oil sales remain high, driven by demand from China and India.
Weafer believes the new EU sanctions,which kicked in on February 5 and target diesel and other refined products, are a potentially key moment.
“There’s an enormous question mark over how much money Russia will earn from exporting hydrocarbons and extractive industries this year,” he said. “And it certainly will be significantly less than in 2022, that’s for sure.”
Edited by: Kristie Pladson
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Atlantic Canada’s economy has “wind in its sails” and is poised for an economic breakout, according to a new report from the Ottawa-based think-tank Public Policy Forum.
The report, entitled the Atlantic Canada Momentum Index, says that Canada’s East Coast provinces are experiencing “historic” momentum, in large part because of population growth.
“It’s ‘have not’ no more,” said president and CEO Edward Greenspon. “Atlantic Canada did lag on a number of indicators in a lot of ways for years. But that’s not true anymore.”
The think-tank measured 20 metrics, including measuring economic and population growth, level of education, immigration numbers, median age and employment rate. It based provinces’ performance on how many of these indicators improved between 2015 and 2022.
It found Atlantic Canada is performing comparably to the national average, and that it is showing a significant improvement compared to its performance from 2008 to 2015.
“I am proud,” said Wade MacLauchlan, former P.E.I. premier and one of 17 former Atlantic Canadian premiers and deputy premiers who signed on to the report.
“This is something that I and hundreds of thousands of others have worked hard for over generations. And there is a real sense of accomplishment and something on which we can build and grow.”
But some Atlantic Canadians say this report doesn’t tell the whole story: they say they’re squeezed by skyrocketing housing costs, as population growth and increased wealth creates a strain on the existing housing stock.
Population propelling economic growth
Atlantic Canada’s population declined five decades in a row in proportion to the rest of Canada.
That tendency is shifting.
“For the first time, you’re beginning to see population growth,” said Greenspon.
Recent census numbers show the country’s fastest-growing cities — Halifax and Moncton — are in the Maritimes.
Much of that population growth is spurred by people like Pauline Landriault, an Ontario resident who is able to work remotely. She has a property in Nova Scotia and is hoping to move there permanently.
“There’s a lot of people who bought places here during the pandemic,” she said. “With the nature and the trails, it’s the most beautiful province in the country. It’s a hidden gem.”
The Atlantic bubble, which allowed unrestricted travel within the East Coast provinces for a period during the COVID-19 pandemic, may have also made the province attractive to people looking to relocate during the pandemic, according to former Nova Scotia premier Stephen McNeil.
McNeil said his province was beginning to see more jobs creation around 2015, and shifted focus toward attracting more people back to Atlantic Canada to fill those jobs.
He said his government fought the long-held belief that Maritimers must give up career advancement aspirations if they choose to stay out East.
“We can do all the economic stuff right, but if we don’t have people, then we’re doomed,” he said. “We’re as close to New York as Toronto is, but we’re more affordable.”
He said economic challenges in Alberta, low interest rates fostering growth, and Ontario’s high housing prices contributed to people’s decisions to move to Nova Scotia.
Immigration is also booming in Atlantic Canada: the average number of immigrants in Atlantic Canada from 2008 to 2015 was about 7,000 per year. From 2015 to 2022, that average more than doubled, to about 15,000 immigrants per year.
The median age of Atlantic Canadians, while older than the national average, has slowed in its growth.
“There’s a growth in confidence, in population and economic activity. In many ways, this is for Atlantic Canadians, the opportunity to say after 130 years of outmigration, let’s try something else,” MacLauchlan said.
With more prosperity, new challenges
Though the Public Policy Forum report does track the number of new housing builds in a region, it does not track the current costs of housing in Atlantic Canada, which have soared in recent years.
Halifax resident Melissa Gazzard relies on social assistance to pay her bills, and she said increased cost of housing has made it extremely difficult to find a long-term home.
“They’re leaving us that are out here to basically fend for ourselves,” she said. “It’s really hard. They put us in one circle, and say, ‘OK, we’ll deal with you later.’ But it never gets dealt with.”
One of the other metrics measured was access to a family physician, an area where Atlantic Canada continues to struggle.
Nearly 370,000 Atlantic Canadians don’t have a family doctor and the report shows that provinces have not made improvement in decreasing this number.
“There’s new challenges and problems. There’s problems around health care and access to physicians,” said Greenspon.
“There’s always going to be some people left behind, and policy needs to address that and make sure they don’t fall through cracks,” he said.
How to keep building?
For momentum to keep growing in Atlantic Canada, it needs to be fostered, the report concludes.
“It would be negligent to let this swelling momentum pass without putting the necessary policy supports in place to perpetuate it,” it reads.
The think-tank says it will meet with policymakers to discuss policies to build on the momentum.
“The message that I think is most important is to really recognize we can raise our expectations and that we should keep going. Because this is working and it is good for us,” said MacLauchlan.
McNeil, who left office in 2021, said he expects the trend will continue upward.
“Atlantic Canada is alive and well, and quite frankly, a global player,” he said.
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OTTAWA –
The Bank of Canada says it’s still concerned inflation might be harder to bring down than expected, noting the economy is still in excess demand.
On Wednesday, the central bank published a summary on the governing council’s deliberations ahead of its decision to hold its key interest rate steady on March 8.
The members of the governing council, which include governor TIff Macklem and his deputies, were encouraged to see the economy and inflation both slowing, supporting their decision to hold the key interest rate steady at 4.5 per cent.
However, the governing council remained concerned about the risk of inflation getting stuck above two per cent and agreed that supply was still outstripping demand in the economy.
In the fourth quarter, the Canadian economy posted no growth as the accumulation of business inventories slowed.
“With inventories adjusting earlier than anticipated, governing council concluded that growth in early 2023 may be a bit stronger than the bank had forecast,” the summary said.
Ahead of the federal and provincial governments rolling out their budgets, the governing council also discussed the risk of elevated government spending further fueling demand in the economy.
Finance Minister Chrystia Freeland has pledged that her March 28 budget will be fiscally restrained, noting that the federal government doesn’t want to make the Bank of Canada’s job of fighting inflation harder.
The central bank said it will incorporate the fiscal plans of both levels of government into its updated projections to be released in the next monetary policy report.
The Bank of Canada will release the report along with its next interest rate decision on April 12.
Economists widely expect the central bank to continue holding its key interest rate steady.
The latest consumer price index report showed inflation slowed further in February, with the annual rate falling to 5.2 per cent.
However, an ongoing concern for the Bank of Canada is the tight labour market and strong wage growth.
The unemployment rate continues to hover near record lows, while average hourly wages have been increasing at an annual rate of four to five per cent.
The Bank of Canada notes in its summary of deliberations that the governing council continues to believe that the pace of wage growth will make it harder to get inflation back to its two per cent target, given wage growth isn’t accompanied with productivity growth.
This report by The Canadian Press was first published March 22 2023.
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- Set new industry standards for driving the transition to the plastics circular economy and solidifying the market for recycled polyethylene, with 30 per cent of its polyethylene sales[i] from recycled contet;
- Be at the forefront of decarbonization by reducing its Scope 1 and 2 absoute CO2 emissions by 30 per cent[ii]; and
- Become a Top 30 company in Canada.
Outlined in NOVA 2030: Our Roadmap to Sustainability Leadership, NOVA Chemicals has also shared its aspiration to reach net-zero Scope 1 and 2 emissions by 2050.
To achieve these aspirations, NOVA Chemicals anticipates investing between USD$2-4 billion by 2030 to expand its sustainable product offerings, decarbonize assets, and build a state-of-the-art mechanical recycling business while exploring new advanced recycling technologies to create high-quality, high-performance recyclable and low carbon plastics.
Building on its proprietary, Advanced SCLAIRTECHTM technology (AST), NOVA Chemicals will explore expanding its product portfolio to include the development of innovative, advanced materials. These new product offerings, which will include the company’s first ASTUTE™ polyolefin plastomers line, will better serve existing customers and provide more options for sustainability-focused end markets such as electric vehicles and renewables.
NOVA Chemicals has already begun growing its portfolio of recycled and recyclable polyethylene resins through its recently announced launch of SYNDIGO™ recycled polyethylene, a new portfolio of products made from circular polymers to encourage both waste and emissions reductions.
The company has also announced a virtual power purchase agreement (VPPA) with Shell Energy for renewable power, marking the first of many opportunities to increase low carbon, renewable energy in its power portfolio.
Today’s announcement builds upon NOVA Chemicals’ long-standing commitment to developing innovative solutions for its customers while enabling the circular economy and preparing for and responding to a changing world. NOVA’s approach to managing its material ESG topics including Responsible Care® and its commitment to the environment, health, and safety, can be found in its annual ESG report.
– 30 –
About NOVA Chemicals Corporation
NOVA Chemicals aspires to be the leading sustainable polyethylene producer in North America. Our driving purpose is to reshape plastics for a better, more sustainable world by delivering innovative solutions that help make everyday life healthier and safer and acting as a catalyst for a low carbon, zero-plastic-waste future. NOVA Chemicals’ innovative and quality product offerings, value chain collaboration, and unique customer experience is what sets us apart; our customers use our products to create easy-to-recycle and recycled content films, packaging, and products. Our employees work to ensure health, safety, security, and environmental stewardship through our commitment to sustainability and Responsible Care®.
NOVA Chemicals, headquartered in Calgary, Alberta, Canada, has nearly 2,500 employees worldwide and is wholly owned by Mubadala Investment Company of the Emirate of Abu Dhabi, United Arab Emirates. Learn more at www.novachem.com or follow us on LinkedIn.
NOVA Chemicals’ logo is a registered trademark of NOVA Brands Ltd.; authorized use.
Advanced SCLAIRTECH™, SYNDIGO™, LEEP™, and ASTUTE™ are trademarks of NOVA Chemicals.
Responsible Care® is a registered trademark of the Chemistry Industry Association of Canada.
This news release contains forward-looking statements. By their nature, forward-looking statements require NOVA Chemicals to make assumptions and are subject to inherent risks and uncertainties. NOVA Chemicals’ forward-looking statements are expressly qualified in their entirety by this cautionary statement. In addition, the forward-looking statements are made only as of the date of this news release, and except as required by applicable law, NOVA Chemicals undertakes no obligation to update the forward-looking statements to reflect new information, subsequent events or otherwise.
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