As Europe falls into recession, Russia climbs out

Mr Putin’s recent decision to launch a partial mobilisation has dealt a further economic blow. It provoked a mini-bank run as people once again worried about the future of the country. By our estimates Russians pulled out $14bn-worth of rouble deposits in September, about a third as much as in February. Another 300,000 or so Russians have probably fled. A further reduction in the labour force is worsening worker shortages, compounding Russia’s inflation problem. Headline inflation is sharply down from its peak, but price pressure in the labour-intensive services sector is getting worse.

Despite these difficulties, the recession has probably now come to an end. Many people doubt official gdp data, but it is possible to get a sense of activity from a range of sources. Goldman Sachs, a bank, produces a “current-activity indicator”, which suggests how economies are doing from month to month. The data indicate that Russian activity is quite a bit livelier than it is in big European countries (see chart). A spending measure produced by Sberbank, another bank, wobbled following the mobilisation decree but has since edged back up. Output in the car industry, which a few months ago had practically fallen to zero, has also bounced back, suggesting that producers have managed to source supplies from outside the West. In dollar terms Russia’s monthly goods imports now almost certainly exceed last year’s average.

In its latest forecasts, published on October 11th, the imf upgraded Russia’s economic prospects for this year. In April it thought that Russian gdp would fall by 8.5%. It now expects a decline of 3.4%. This is nothing to gloat about, but it is manageable. Indeed, the economic data suggest that Russia will be able to keep fighting. In late September the government put out a draft budget for 2023 to 2025. According to Elina Ribakova of the Institute of International Finance, an industry group, the budget implies large increases in war-related spending in the coming years—particularly on internal “security”. Having avoided economic collapse, Mr Putin expects to double down, both abroad and at home. ■

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