Has the War in Ukraine Destroyed Russia’s Economy?
In the wake of Russia’s invasion of his country in February 2022, Ukrainian President Volodymyr Zelenskyy pleaded with Western countries to leave Russia. Hundreds of U.S. and EU-based companies heeded his call to “make sure that the Russians do not receive a single penny,” with Western politicians reportedly predicting that the exodus “would help strangle the Russian economy and undermine the Kremlin’s war effort,” while Yale’s Jeffrey Sonnenfeld and his four co-authors declared that “business retreats and sanctions are catastrophically crippling the Russian economy.” Predictions of Russia’s economic meltdown continued into 2023, with the New Republic diagnosing Russia as “going broke fast” and Business Insider editors describing Russia’s economy as “spiraling.” The future has looked dim even to some of the lead players in the Russian economy. One of Putin’s own oligarchs, Oleg Deripaska, predicted in March 2023 that Russia may run out of money in 2024 and would need foreign investment to prevent that.
Fast-forward to 2024, however, and you will find that Russia’s National Wealth Fund contains 228 billion Chinese yuan, 335 tons of gold and 1.65 billion rubles in what totaled some $135.7 billion as of April 2024. Moreover, this year saw Russia post a consolidated budget surplus of 559.6 billion rubles ($6.3 billion) in January–May 2024, with its national debt under 20% of GDP.
Not only is Russia far from being penniless, its economy is growing, prompting both the World Bank (WB) and International Monetary Fund (IMF) to revise upward their forecasts of Russian GDP growth. The WB now sees the Russian economy growing by 2.2% this year rather than 1.3% as it has previously predicted. Meanwhile the IMF expects Russian GDP to grow by 3.2% rather than by 2.6% as previously predicted. If the IMF’s forecast holds, then Russia’s economy will have grown faster than all advanced economies, including Germany (0.2% growth expected by IMF in 2024), the U.K. (0.5% growth expected by IMF in 2024) and the U.S. (2.7% growth expected by IMF in 2024).