Page 7 - RusRPTFeb24

Ironically, Ukraine’s history of protest related chaos is one of the main deterrents for ordinary Russians that have considerably more to lose than their southern cousins.
On the economic front things are going well with historically low unemployment and rising real incomes. The traders have replaced all the goods that went missing at the start of the war and life is pretty normal for most people.
The one bugbear is high inflation, but at 7.42% in 2023 it is not at crippling levels. This is slightly below than the Central Bank’s prediction, which forecasted inflation would rise to 7.6% by the end of the year. However, inflation slowed in December, defying expert expectations and coming down slightly to 7.4% y/y. This may have been due in part to the CBR hiking the key rate for the fifth time in a row on December 15. The Bank increased the rate from 15% to 16% in their continued effort to bring inflation down to the 4% target. The CBR has matters well in hand even if growth will slow and investment will fall.
Both the CBR and the Kremlin remain deeply concerned about inflation’s effect on the upcoming presidential election. Although Deputy Chairman of the CBR Alexey Zabotki said that the Bank will likely maintain tight monetary policy “for a long time,” Putin reassured constituents that the high key rate was a “temporary phenomenon” during a pre-election tour of the regions. Cost of living concerns are of particular interest to the President, who went on to discuss the sudden spike in egg prices and a shortage of chicken meat.
Most of this year will be taken up with fencing over sanctions. The most important change to Russia’ macroeconomic situation over the past twelve months has been the sharp deterioration of its external balance. In 2023, total goods exports reached $423bn, a decline of 29% vs. the previous year, report KSE analysts. This has contributed to much smaller trade turnover in 2023 of $118bn, down by 63% y/y and current account surplus has also fallen from over $200bn in 2022 to only $50bn, a decline of 79%.
As a result of sharply lower inflows of foreign currency, the ruble has lost ~40% of its value against euro and US dollar since the autumn of 2022.
Russia has successfully dodged almost all the sanctions placed on it and, as bne IntelliNews reported, the boomerang effect is hurting Europe more than Russia which will undermine resolve to continue them. But the US is increasingly acting to enforce sanctions on its own. It has targeted Russia’s LNG production, without the support of the EU and added very stringent restrictions on banking and more oil tankers that are having some effect. But Russia appears resilient and even if the sanctions bite deeper they are unlikely to do enough to make the Kremlin change course.
The data shows that widespread violations of the oil price sanctions continue
7 RUSSIA Country Report February 2024 www.intellinews.com