• The Russian economy emerged from the first shock of the war and sanctions in 2022 far better than many expected, with a fall in GDP of just 2.2%.
• Putin’s reaction was to crow that the experts were wrong, but the underlying issue is economic management.
• The track record of stability clocked up by Putin’s regime comes at a heavy price in terms of macroeconomic imbalance.
• Putin’s regime has increasingly resorted to “War Keynesianism”, with large salary payments to soldiers propping up incomes and building a constituency loyal to the regime.
• Russia must manage the bottlenecks imposed by sanctions and ensure that aggregate demand continues to bubble along.
• The truce between the war economists and the conservative advocates of continuity as personified by Nabiullina has held, but it will be tested in 2023.
• The budget deficit is 1.8 trillion RUB (1.2% of GDP) and liquid assets in the National Welfare Fund amount to 4% of GDP.
Published February 8, 2023
Visit Chartbook to read Adam Tooze’s original post Chartbook #195: How to pay for Putin’s war?Russia’s technocrats torn between defense of the austerity status quo and national mobilization.
