With the beginning of the third week of Russia’s invasion of Ukraine, coupled with an onslaught of unprecedented international sanctions against Russia, the country’s economy is not looking good. The Russian ruble continues to tank. The Russian stock market is still closed. Russian consumer confidence is low, and Russia’s international credit rating has been severely downgraded by Moody’s, Fitch and S&P Global as the risk of the government and major companies defaulting on their debts rises.
Meanwhile, U.S. and European leaders are entertaining the possibility of extending international sanctions to cover Russian energy exports, mainly oil and gas. Russian energy powers a lot of Europe. It’s also Russia’s last unsanctioned source of foreign currency. We could be heading toward a Russia truly cut off from the world economy, which is rarely seen in history.
Russia has the 11th biggest economy in the world —– or it did, until it was hit with massive financial and trading sanctions over the past couple weeks. And the sanctions are increasingly disrupting business and consumer life in Russia, cutting Russians off from necessities and luxuries alike.
“Technology imports — from your iPhones, computers, from your medical supplies — so to take that away from them, I think is almost impossible to think there wouldn’t be serious repercussions domestically,” said Josh Lipsky, director of the GeoEconomics Center at the Atlantic Council.
Russia’s oil and gas exports have not been blocked so far, but sanctions are cutting into them, according to Jay Hatfield at InfraCap investment advisers.
“The global transportation and trading companies have not been able to get financing for cargos, and that’s already restricted the flow of Russian oil,” Hatfield said.
According to Lipsky, if oil and gas revenues in dollars and euros were shut down, “it would be a significant blow to one of their last economic lifelines that is stabilizing the Russian economy.”
This would mark Russia’s near-total isolation, something called “autarky” in economic theory, Lipsky said.
“There are elements of autarky that we are headed to, in terms of a closed system. The question is, is Russia prepared, is Putin prepared, to have that kind of system in place where the ruble and the rest of the economy is closed off?” Lipsky said.
This wouldn’t necessarily mean the end of the Russian economy. Russians could still buy stuff produced domestically, according to Columbia political economist Sharyn O’Halloran.
“The ruble will still be printed. It will still be valued for their own internal market. If Russia wants to build its own pens and pencils and paper and so forth, well that’s fine, but it’s going to be very expensive for them to do that,” she said.
We’ve never seen it done in an economy as big and complicated as Russia’s.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
