Russia has been feeling the sting of Western sanctions hamper Russia’s economy, but the war in Ukraine that sparked those repercussions still rages at year’s end.
Missiles are falling on Ukrainian cities, soldiers are fighting and the death toll continues to mount.
Critics may point to the continuing conflict as proof sanctions have failed. But experts say these measures serve to maintain pressure on Moscow, and they still serve a purpose even though Russia hasn’t withdrawn its forces.
“I don’t think that sanctions are going to necessarily force Russia to negotiate,” said Alexander Lanoszka, an assistant professor of international relations at the University of Waterloo in southwestern Ontario.
Former Russian leader Dmitry Medvedev, the current deputy chairman of Russia’s security council, is seen touring Uralvagonzavod, a tank factory in Nizhny Tagil, Russia, in October. (Sputnik/AFP/Getty Images)
However, Lanoszka said the sanctions put stress on the Russian state and make it harder for Moscow to fund its war.
“[They can] raise the opportunity costs that the Kremlin faces when deciding its budget,” said Lanoszka, who believes Western financial and military support for Ukraine will provide more tangible effects on the war-fighting front.
Less decline than forecast
The International Monetary Fund (IMF) estimates Russia’s economy will shrink 3.4 per cent this year — a fraction of the 35 per cent it projects Ukraine’s war-ravaged economy will contract.
The drop in Russia’s GDP issharply lower than predicted, though Sergei Guriev, an economics professor and provost at Sciences Po in Paris, said the measure “overestimates the performance” of the country’s wartime economy.
A woman walks past a closed shop in Moscow last month. The International Monetary Fund forecasts that Russia’s economy will decline by 3.4 per cent this year. (Yuri Kadobnov/AFP/Getty Images)
Increased production of artillery shells in Russia makes it appear that the GDP is increasing, but Guriev noted that “has no positive impact on the quality of life of Russian households.”
A marked drop in household spending is a true indication of how the war — and sanctions — have affected people’s lives there, he said.
Joy Neumeyer, a historian and journalist, said Russian state media are promoting a view that sanctions have been a costly failure for the West, while domestic consumers are doing well.
“The state media also claims, contrary to most economists, that Western brands are being seamlessly replaced by domestic equivalents,” Neumeyer, who has previously worked as a reporter in Russia, said via email.
Top Russian officials have publicly acknowledged the challenges sanctions pose.
In July, Russian President Vladimir Putinslammed the “economic blitzkrieg” the country has faced. Yet he suggested it wasn’t causing the damage the West had counted on.
A woman examines chandeliers being offered for sale at a street market in St. Petersburg, Russia, last month. (Dmitri Lovetsky/The Associated Press)
More recently, Elvira Nabiullina, the head of Russia’s central bank, had a similar message, telling lawmakers the country’s economy and banking sector had withstood Western pressures — though she notes their effects have been widely felt.
“Sanctions are very powerful and their influence on the Russian and global economy should not be downplayed,” said Nabiullina,who faces sanctions herself.
Janis Kluge, senior associate at the German Institute for International and Security Affairs, said Russia’s introduction of capital controls at the onset of the war was the most important adjustment it made.
“This helped to stabilize the ruble exchange rate in the first weeks after sanctions were imposed, and the stronger ruble took some pressure off inflation,” Kluge said via email.
Higher energy prices
Energy prices have soared amid the war’s chaos, with European gas prices up “more than four-fold since 2021,”according to the IMF in October.
A man is seen steering his inflatable boat in the Gulf of Finland, off the shore in St. Petersburg, Russia, in October, with the business tower Lakhta Center, the headquarters of Russian gas monopoly Gazprom in the background. (Dmitri Lovetsky/The Associated Press)
Higher gas prices benefit Russia, which is why Western governments — after months of discussions — enacted a price cap on Russian oil in a bid to limit the income Moscow can generate from its exports.
Russian authorities have rejected the price cap and threatened to cut shipments to countries that endorse it.
In response to sanctions, Kluge said Russia “conquered new markets for its oil exports,” selling more oil to China and India.
However, Guriev said the average price that Russia gets for its oil is decreasing, and this has already had implications for its war effort — such as when Moscow turned to a mobilization effort to bring more soldiers to Ukraine.
“It felt that it no longer has an unlimited amount of cash to spend on hiring soldiers,” said Guriev. “And that’s the major impact of the sanctions so far.”
Western exodus
The Russian economy has also been harmed by the exit of many Western companies — more than 1,000 of which have, to varying degrees, curtailed business activities there.
A man walks past a Krunchy Dream cafe store in Moscow last month. It opened at the site of a former Krispy Kreme store, after the U.S. chain left the Russian market. (Evgenia Novozhenina/Reuters)
Experts say major industries in Russia — including some key to its war effort — have been compromised by this exodus and by sanctions that have cut access to Western technology and finances.
“Russia did not fully understand how dependent its military-defence complex is on Western components, so now we see that Russia cannot reproduce the stock of modern tanks, modern jets, modern rockets,” said Guriev.
The war in Ukraine has upended markets, driven up global food prices and created uncertainty about Europe’s security.
It has also prompted Western countries to act.
Pedestrians walk past two soldiers as they stand at the Red Square near Saint Basil’s Cathedral in Moscow last month. (Yuri Kadobnov/AFP/Getty Images)
The University of Waterloo’s Lanoszka said the countries involved in the sanctions efforts have stuck together more closely than expected.
Ten months into the war, he judges the differences among them to be “more tactical than strategic.”
For Russia, the longer it’s isolated from interacting more widely with the world, the more damaging the sanctions are predicted to be.
“While sanctions are a slow tool, time works in their favour,” Kluge and a co-authorwrote in a fall brief for the European Union Institute for Security Studies.
Guriev said the sanctions’ ongoing strength will depend on how tightly the West enforces them.
If the goal is to hamper Russian industry and its military industry in particular, he said the West must continue to “play this difficult and tiring, whack-a-mole game” of crimping other countries’ efforts to help Russia circumvent sanctions.
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.
