Latest news with #StockholmInstituteofTransitionEconomics
Yahoo
14-05-2025
- Business
- Yahoo
Despite growth claims, Russia's war economy shows deep risks, Reuters reports
Russia's economy faces mounting pressure due to its full-scale invasion of Ukraine and Western sanctions, according to a new report from the Stockholm Institute of Transition Economics (SITE) presented for talks of European Union finance ministers on May 13. While the Kremlin continues to project economic strength—citing GDP growth of 4.3% in 2024—SITE researchers warned that the apparent resilience is misleading. "The fiscal stimulus of the war economy has kept the economy afloat in the short term, but the reliance on opaque financing, distortionary resource allocation, and shrinking fiscal buffers makes it unsustainable in the long term," the report read, according to Reuters. "Contrary to Kremlin narratives, time is not on Russia's side." Torbjorn Becker, who presented the findings, cast doubt on the credibility of Russia's economic statistics. He questioned the government's claim of 9–10% inflation, pointing to the central bank's unusually high policy rate of 21%. "Which regular central bank would have a policy rate that's basically 11.50 percentage points higher than the inflation rate? If any of our central banks were doing something like that, they would be out of their job the next day," Becker said. "If you understate inflation, you will then overstate real GDP numbers." Becker also raised concerns about Russia's true fiscal deficit. Despite the war, Moscow has officially reported a budget shortfall of just 2% of GDP annually since the invasion began. "Fiscal numbers in Russia don't really correspond to what we think that they are putting into the war effort," Becker said. He argued that if off-budget military financing through the banking system were accounted for, the actual deficit could be twice as high. That, he warned, is increasing financial risks, as banks report unusually high credit growth. "These are all indicators that we usually look at when we want to predict the banking crisis," he added. European Economic Commissioner Valdis Dombrovskis backed the SITE analysis. "Their analysis highlights the unreliability of Russian statistics, and how the Russian economy is not performing as well as its official statistics suggest," Dombrovskis said. "The Commission broadly agrees with this analysis and the overall increasing fragility of the Russian economy. This underlines the importance of the international community's ongoing efforts to limit the Kremlin's capacity to continue its war of aggression against Ukraine." Read also: As Ukraine, Russia peace talks loom, all eyes are on Putin's next move We've been working hard to bring you independent, locally-sourced news from Ukraine. Consider supporting the Kyiv Independent.
Yahoo
13-05-2025
- Business
- Yahoo
European economist says Russia's economy is strained due to the Ukraine war and sanctions
BRUSSELS (AP) — Russia's economy is under growing strain as its invasion of Ukraine drags on and Western sanctions are undermining President Vladimir Putin's ability to sustain his war, a leading European economist said after briefing finance ministers on Tuesday. The economist, Torbjörn Becker, Director of the Stockholm Institute of Transition Economics, warned that should Russia prevail, European Union governments would have to spend 2-3 times more than they currently do on defense for several years. Russia's 'financial system, their macroeconomic performance, is under pressure. It's not in balance. Risks are mounting. But it doesn't mean that we can sit back and relax,' Becker told reporters at EU headquarters in Brussels. He spoke after briefing the bloc's finance ministers to help provide a picture of 'the actual condition of Russia's economy, which significantly contrasts with the narrative promoted by Russian propaganda,' the EU's Polish presidency said. It said that discussion would help 'us to better shape punitive, financial and economic sanctions against Russia.' Becker said Russia's economy only accounts for about 12% of the economies of the world's biggest trading bloc. He underlined that it is highly dependent on oil and natural gas revenue, and on imports of high-tech equipment to sustain the war effort. Still, Russia's economy has outperformed predictions. High defense spending has propelled growth and kept unemployment low despite fueling inflation. At the same time, wages have gone up to keep pace with inflation, leaving many workers better off. Large recruiting bonuses for military enlistees and death benefits for those killed in Ukraine have also put more income into the country's poorer regions. Over the long term, inflation and a lack of foreign investments remain threats to the economy. The question is how long Russia's militarized economy can keep going before those issues bite and whether it can hold out for longer than Ukraine and its Western backers. To hit its economy harder, EU envoys have drafted a new set of sanctions that would target more ships in the shadow fleet of tankers that Russia has deployed to evade a price cap of $60 per barrel imposed on Russian oil by the Group of 7 democracies. They could also freeze the assets of the Nord Stream II gas pipeline consortium. The pipeline is not in use, but the EU believes the move could help to discourage investment. The sanctions could enter force as soon as Thursday. 'If we can lower oil prices and gas revenues and put tighter sanctions on what they can import, that's great,' Becker said. He said U.S. President Donald Trump should press 'China and India about what they are paying for and what they're exporting to Russia.' Russia found new markets for its oil in India and China after the EU imposed a near-total ban and continues to earn a substantial part of government revenues from exports of oil and gas. Becker also urged Trump to hit Russia's financial system by restricting international transactions. 'If something ruins an economy pretty quickly, it's a banking crisis,' he said. In a recent report, his institute said that Russia's oil revenues decreased dramatically in early 2025, notably due to EU and G7 sanctions on the ghost fleet. This has forced Russia to withdraw from its sovereign wealth fund. The institute estimates that the liquid part of the fund is now equivalent to less than 3% of GDP. 'If oil prices stay as they are, they will certainly run out of these funds in a year,' Becker said. ___ David McHugh reported from Frankfurt, Germany.
13-05-2025
- Business
European economist says Russia's economy is strained due to the Ukraine war and sanctions
BRUSSELS -- Russia's economy is under growing strain as its invasion of Ukraine drags on and Western sanctions are undermining President Vladimir Putin's ability to sustain his war, a leading European economist said after briefing finance ministers on Tuesday. The economist, Torbjörn Becker, Director of the Stockholm Institute of Transition Economics, warned that should Russia prevail, European Union governments would have to spend 2-3 times more than they currently do on defense for several years. Russia's 'financial system, their macroeconomic performance, is under pressure. It's not in balance. Risks are mounting. But it doesn't mean that we can sit back and relax,' Becker told reporters at EU headquarters in Brussels. He spoke after briefing the bloc's finance ministers to help provide a picture of 'the actual condition of Russia's economy, which significantly contrasts with the narrative promoted by Russian propaganda,' the EU's Polish presidency said. It said that discussion would help 'us to better shape punitive, financial and economic sanctions against Russia.' Becker said Russia's economy only accounts for about 12% of the economies of the world's biggest trading bloc. He underlined that it is highly dependent on oil and natural gas revenue, and on imports of high-tech equipment to sustain the war effort. Still, Russia's economy has outperformed predictions. High defense spending has propelled growth and kept unemployment low despite fueling inflation. At the same time, wages have gone up to keep pace with inflation, leaving many workers better off. Large recruiting bonuses for military enlistees and death benefits for those killed in Ukraine have also put more income into the country's poorer regions. Over the long term, inflation and a lack of foreign investments remain threats to the economy. The question is how long Russia's militarized economy can keep going before those issues bite and whether it can hold out for longer than Ukraine and its Western backers. To hit its economy harder, EU envoys have drafted a new set of sanctions that would target more ships in the shadow fleet of tankers that Russia has deployed to evade a price cap of $60 per barrel imposed on Russian oil by the Group of 7 democracies. They could also freeze the assets of the Nord Stream II gas pipeline consortium. The pipeline is not in use, but the EU believes the move could help to discourage investment. The sanctions could enter force as soon as Thursday. 'If we can lower oil prices and gas revenues and put tighter sanctions on what they can import, that's great,' Becker said. He said U.S. President Donald Trump should press 'China and India about what they are paying for and what they're exporting to Russia.' Russia found new markets for its oil in India and China after the EU imposed a near-total ban and continues to earn a substantial part of government revenues from exports of oil and gas. Becker also urged Trump to hit Russia's financial system by restricting international transactions. 'If something ruins an economy pretty quickly, it's a banking crisis,' he said. In a recent report, his institute said that Russia's oil revenues decreased dramatically in early 2025, notably due to EU and G7 sanctions on the ghost fleet. This has forced Russia to withdraw from its sovereign wealth fund. The institute estimates that the liquid part of the fund is now equivalent to less than 3% of GDP. 'If oil prices stay as they are, they will certainly run out of these funds in a year,' Becker said.
Washington Post
13-05-2025
- Business
- Washington Post
European economist says Russia's economy is strained due to the Ukraine war and sanctions
BRUSSELS — Russia's economy is under growing strain as its invasion of Ukraine drags on and Western sanctions are undermining President Vladimir Putin's ability to sustain his war, a leading European economist said after briefing finance ministers on Tuesday. The economist, Torbjörn Becker, Director of the Stockholm Institute of Transition Economics, warned that should Russia prevail, European Union governments would have to spend 2-3 times more than they currently do on defense for several years. Russia's 'financial system, their macroeconomic performance, is under pressure. It's not in balance. Risks are mounting. But it doesn't mean that we can sit back and relax,' Becker told reporters at EU headquarters in Brussels. He spoke after briefing the bloc's finance ministers to help provide a picture of 'the actual condition of Russia's economy, which significantly contrasts with the narrative promoted by Russian propaganda,' the EU's Polish presidency said. It said that discussion would help 'us to better shape punitive, financial and economic sanctions against Russia.' Becker said Russia's economy only accounts for about 12% of the economies of the world's biggest trading bloc. He underlined that it is highly dependent on oil and natural gas revenue, and on imports of high-tech equipment to sustain the war effort. Still, Russia's economy has outperformed predictions. High defense spending has propelled growth and kept unemployment low despite fueling inflation. At the same time, wages have gone up to keep pace with inflation, leaving many workers better off. Large recruiting bonuses for military enlistees and death benefits for those killed in Ukraine have also put more income into the country's poorer regions. Over the long term, inflation and a lack of foreign investments remain threats to the economy. The question is how long Russia's militarized economy can keep going before those issues bite and whether it can hold out for longer than Ukraine and its Western backers. To hit its economy harder, EU envoys have drafted a new set of sanctions that would target more ships in the shadow fleet of tankers that Russia has deployed to evade a price cap of $60 per barrel imposed on Russian oil by the Group of 7 democracies. They could also freeze the assets of the Nord Stream II gas pipeline consortium. The pipeline is not in use, but the EU believes the move could help to discourage investment. The sanctions could enter force as soon as Thursday. 'If we can lower oil prices and gas revenues and put tighter sanctions on what they can import, that's great,' Becker said. He said U.S. President Donald Trump should press 'China and India about what they are paying for and what they're exporting to Russia.' Russia found new markets for its oil in India and China after the EU imposed a near-total ban and continues to earn a substantial part of government revenues from exports of oil and gas. Becker also urged Trump to hit Russia's financial system by restricting international transactions . 'If something ruins an economy pretty quickly, it's a banking crisis,' he said. In a recent report, his institute said that Russia's oil revenues decreased dramatically in early 2025, notably due to EU and G7 sanctions on the ghost fleet. This has forced Russia to withdraw from its sovereign wealth fund. The institute estimates that the liquid part of the fund is now equivalent to less than 3% of GDP. 'If oil prices stay as they are, they will certainly run out of these funds in a year,' Becker said. ___ David McHugh reported from Frankfurt, Germany.
Associated Press
13-05-2025
- Business
- Associated Press
European economist says Russia's economy is strained due to the Ukraine war and sanctions
BRUSSELS (AP) — Russia's economy is under growing strain as its invasion of Ukraine drags on and Western sanctions are undermining President Vladimir Putin's ability to sustain his war, a leading European economist said after briefing finance ministers on Tuesday. The economist, Torbjörn Becker, Director of the Stockholm Institute of Transition Economics, warned that should Russia prevail, European Union governments would have to spend 2-3 times more than they currently do on defense for several years. Russia's 'financial system, their macroeconomic performance, is under pressure. It's not in balance. Risks are mounting. But it doesn't mean that we can sit back and relax,' Becker told reporters at EU headquarters in Brussels. He spoke after briefing the bloc's finance ministers to help provide a picture of 'the actual condition of Russia's economy, which significantly contrasts with the narrative promoted by Russian propaganda,' the EU's Polish presidency said. It said that discussion would help 'us to better shape punitive, financial and economic sanctions against Russia.' Becker said Russia's economy only accounts for about 12% of the economies of the world's biggest trading bloc. He underlined that it is highly dependent on oil and natural gas revenue, and on imports of high-tech equipment to sustain the war effort. Still, Russia's economy has outperformed predictions. High defense spending has propelled growth and kept unemployment low despite fueling inflation. At the same time, wages have gone up to keep pace with inflation, leaving many workers better off. Large recruiting bonuses for military enlistees and death benefits for those killed in Ukraine have also put more income into the country's poorer regions. Over the long term, inflation and a lack of foreign investments remain threats to the economy. The question is how long Russia's militarized economy can keep going before those issues bite and whether it can hold out for longer than Ukraine and its Western backers. To hit its economy harder, EU envoys have drafted a new set of sanctions that would target more ships in the shadow fleet of tankers that Russia has deployed to evade a price cap of $60 per barrel imposed on Russian oil by the Group of 7 democracies. They could also freeze the assets of the Nord Stream II gas pipeline consortium. The pipeline is not in use, but the EU believes the move could help to discourage investment. The sanctions could enter force as soon as Thursday. 'If we can lower oil prices and gas revenues and put tighter sanctions on what they can import, that's great,' Becker said. He said U.S. President Donald Trump should press 'China and India about what they are paying for and what they're exporting to Russia.' Russia found new markets for its oil in India and China after the EU imposed a near-total ban and continues to earn a substantial part of government revenues from exports of oil and gas. Becker also urged Trump to hit Russia's financial system by restricting international transactions. 'If something ruins an economy pretty quickly, it's a banking crisis,' he said. In a recent report, his institute said that Russia's oil revenues decreased dramatically in early 2025, notably due to EU and G7 sanctions on the ghost fleet. This has forced Russia to withdraw from its sovereign wealth fund. The institute estimates that the liquid part of the fund is now equivalent to less than 3% of GDP. 'If oil prices stay as they are, they will certainly run out of these funds in a year,' Becker said. ___ David McHugh reported from Frankfurt, Germany.
