It depends on what you mean by “job”, and even if Russia’s GDP in reported statistics (as reported) hasn’t collapsed, the worst may not yet be there. Some impacts are not easy to measure.
First, consider what happened to GDP:
figure 1: Russian GDP in billions of Ch.2000 rubles (red), IMF April WEO forecast (blue triangle), May GDP of the Ministry of Economic Development (light red square), all on a logarithmic scale. Levels beyond the third quarter of 2019 are calculated using growth rates.Department of Economic Development estimates cited Beaufit. ECRI defines the recession date from peak to trough, shaded in grey. Source: OECD via FRED, IMF, BOFIT (July 8, 2022)ECRI, and the authors’ calculations.
Some observers point out that Russia’s GDP y/y did not collapse in the first quarter (latest reported data). Note that the 3.5% y/y reading is exactly that – up year-over-year, which includes about a month after sanctions (expanded invasion of Ukraine started on February 24, so only March sanctions data after Q1 ). We don’t have the Q/Q growth rates reported by Rosstat, but if I repeat the quarterly GDP data reported earlier, then we can extrapolate the GDP path shown in Figure 1. This translates to an annualised decline of -1.7% – considerable considering only one month of the quarter reflected the sanctions environment.
Are we heading towards the IMF’s estimates in the April World Economic Outlook? Beaufit Citing a 4% year-over-year decline in GDP in May, if I assume May represents the second quarter, and we start the calculation from the second quarter of 2021, this is shown as the red square in Figure 1. It looks like a big drop in GDP is still possible, Might not be as big as S&P’s March forecastalthough.
Other composite measures show this effect more forcefully. Industrial production and manufacturing production declined year-on-year.
figure 2: Industrial production, a year-on-year increase of %. resource: Trade and Economic Network.
image 3: Manufacturing production, a year-on-year increase of %. resource: Trade and Economic Network.
In its July 8 Weekly Monitoring Regarding Russia, an indispensable resource on the subject, the Bank of Finland Institute for Emerging Economies (BOFIT) states:
Russia’s Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF) found that Russian industrial output has contracted more sharply in recent months, excluding military production. The CMASF estimates that industrial output fell 4% in May. Russia’s lower house of parliament, the Duma, this week approved an amendment to a law that allows the government to impose special measures on companies to meet military needs. For example, companies may be forced to manufacture goods for the military, repair military equipment, or provide transportation for the military.
So one needs to look at these numbers to get a better idea of the state of the Russian economy.
New car registrations/sales dropped significantly.
Figure 4: New car registration. resource: Trade and Economic Network.
Wage growth (y/y) is negative, even though measured inflation (y/y) is rising.
Figure 5: Wage growth, year-over-year growth, %. resource: Trade and Economic Network.
Image 6: CPI inflation, year-on-year growth rate, %. resource: Trade and Economic Network.
The combination of the last two figures implies a substantial drop in real wages.
While the ruble has returned to its pre-sanctions level, it has done so under extremely strict foreign exchange controls that it is inappropriate to consider the current exchange rate a “market rate”.Imports fell, although exactly how much is hard to say, as the government remained mum on trade data (see Starostina/Carnegie Foundation). Here’s the data from the Kiel Institute:
Figure 7: Import growth, month-on-month, %. resource:as an instituteas of July 20, 2022.
What is going on can be deduced by looking at exports to Russia:
Figure 8: Exports to Russia, in USD, 2021M12=100. resource: Macrobond leaves Ika Korhonen.
see also Chorzempa/Peterson IIE Differential impact on imports from sanctioned and non-sanctioned countries.
The government does appear to be under pressure on the budget as revenue growth is not keeping up with inflation as BOFIT Discussion (July 21).
In June, nominal revenue for the federal budget was just 1.5 percentage points higher than a year earlier. The real decline in income was indeed substantial, as consumer and industrial producer prices rose an average of 14% in June from a year earlier. [google translation from Finnish].
Still, the budget is still (slightly) in surplus; but it doesn’t have to be.
In some ways, the impact on the Russian economy won’t show up much in these macroeconomic indicators. Instead (in my own opinion) they will have profound medium and long-term effects on the economy, and The ability of the Russian military to project its power abroad. That’s through the impact of trade/high tech sanctions.as described herein Bruegel articleexport sanctions now imposed on Russia are limiting production (and will almost certainly affect military production of high-tech munitions, aircraft and even tanks).
Targeted sanctions on specific technologies, financial sanctions and “self-sanctions” by private companies are effectively decoupling Russia from the supply of high-tech products. A combination of technical and financial sanctions, public pressure and reputational risk, and the collapse of the Russian economy made the decision to leave the Russian market easy for companies, not just those from NATO allies.
Russia has tried unsuccessfully to resist tech sanctions through import substitution. High-tech products are developed with input from many countries, but few of them can function without input from the EU or the US. Therefore, a single economy cannot replicate the capabilities of the global network.
In some high-tech product industries, the impact of sanctions is already being felt. In the long run, sanctions will also seriously affect Russia’s growth prospects and ensure that waging war means Russia will no longer be a modern economy. Highly skilled Russians have left, reinforcing the effect of sanctions.
Of course, it is debatable how much the high-tech export restrictions will weaken the development of Russian military equipment (see Rand, 2021for example), so there is no guarantee.
