The economies of Russia and Ukraine, reshaped by the war that erupted in 2022, tell a tale of adaptation, realignment, and resilience under the specter of conflict and sanctions. Despite expectations of a deep financial crisis due to sanctions, Russia’s economy has displayed a paradoxical robustness, growing by an estimated 2.5% in 2024 according to the European Bank for Reconstruction and Development (EBRD). This figure marks a downturn from the 3.6% growth in 2023 but nonetheless suggests a capacity to adapt to new economic realities.
Russia’s economic resilience is underpinned by a strategic pivot to prioritize the war effort. “I think it was unrealistic to expect that sanctions against Russia would lead to a deep economic and financial crisis, as many had hoped,” remarked Beata Javorcik, the EBRD’s chief economist. Sanctions have influenced a refocusing of the economy, “so this is leading to faster growth” but “is this growth translating into greater wellbeing of its people? That’s doubtful,” Javorcik remarked.
The impact of sanctions, while not a knockout blow, has been far from negligible. They have significantly hampered technology imports and precipitated an exodus of multinational corporations and skilled labor. For instance, Gazprom, Russia’s state energy giant, experienced a record annual loss in 2023 with the European market effectively shutting its doors to Russian gas exports.
In Ukraine, the war’s toll has been enormous. The economy suffered a profound contraction of 29.1% in 2022 following the onset of the full-scale invasion. Nonetheless, a remarkable recovery of 5.3% was recorded in 2023, supported significantly by a bumper agricultural harvest. Looking ahead to 2024, growth is anticipated to decelerate to 3.0%. “While 2023 growth in Ukraine — an agriculture superpower — had been supported by a record harvest, recent war damage to the country’s electricity infrastructure was among factors seen likely to constrain further growth in 2024,” the bank noted.
It added: “On the positive side, a new Ukrainian Black Sea export corridor along the coastline has been opened, removing some of the wartime uncertainty about the safety of using the Black Sea to export Ukraine’s vast offerings of agricultural produce and other bulk goods such as metals and ores.”
“The (Gaza) conflict’s negative effects on tourism in Jordan and Lebanon may prove to be lasting,” it warned.
Relevant articles:
– Russia and Ukraine: two economies at war , Financial Times, 05/18/2024
– Russia Has the Resources for a Long War in Ukraine, Carnegie Endowment for International Peace, 05/16/2024
– Victory in Ukraine Starts with Addressing Five Strategic Problems, CSIS | Center for Strategic and International Studies, 05/15/2024
– How the Ukraine war brought China and Russia closer together, CNN, 05/16/2024
– Russia Economy Resilient; Gaza War Weighs On Neighbours: EBRD, Barron’s, 05/15/2024
Glad you enjoyed above story, be sure to follow TrendyDigests on Microsoft Start.