Russian economy implodes due to sweeping sanctions: study
- Russia’s economy is collapsing under sweeping sanctions and corporate flight, Yale research finds.
- The study contrasts with economic statements from the Kremlin.
- “The Kremlin has a long history of falsifying official economic statistics,” the Yale authors wrote.
Five months after the invasion of Ukraine, Russia’s economy is imploding due to sweeping international sanctions and corporate flight, according to an analysis by Yale University. The analysis, published July 20, was led by Yale School of Management professor Jeffrey Sonnenfeld.
The study’s findings contrast with studies of the Russian economy which show it is holding up better than expected. Many of these analyses, forecasts and projections draw on Russian government economic publications, which are becoming “increasingly hand-picked, partial and incomplete, selectively rejecting unfavorable statistics while retaining favorable statistics” , wrote the Yale team. “Indeed, the Kremlin has a long history of falsifying official economic statistics, even before the invasion.”
The Russian economy has not rebounded and is in fact “shaken,” the Yale authors found. They used private Russian data sources and sources such as high-frequency consumer data for their analysis.
“From our analysis, it becomes clear: corporate exits and sanctions are catastrophically crippling the Russian economy,” the authors wrote.
One of the reasons Russia appears so resilient is that the Kremlin has flooded the economy with “artificial liquidity” and propped up the ruble with “draconian capital controls,” the Yale team wrote.
In reality, the corporate exodus from Russia has reversed nearly 30 years of foreign investment, as these foreign companies accounted for 40% of the country’s GDP, the Yale authors added.
“Putin is resorting to blatantly unsustainable and dramatic fiscal and monetary intervention to mitigate these structural economic weaknesses, which have already sent his government budget into deficit for the first time in years and depleted his foreign exchange reserves even with high oil prices. ‘energy,’ they wrote. .
In April, Russian Finance Minister Anthon Siluanov said the country would dip into its fund to cover the deficit. The move, the Yale team wrote, points to a Kremlin that is “rapidly running out of money, despite intentional obfuscation.”
The report’s authors call on the international community to keep the pressure on Russia over the war in Ukraine: “The defeatist headlines that the Russian economy has rebounded are simply not factual — the facts are that at all respects and at all levels, the Russian economy is faltering, and now is not the time to step on the brakes.”