- Russia’s economy is crumbling under sweeping sanctions and an exodus of companies, according to a Yale study.
- The study contrasts with the Kremlin’s economic publications.
- “The Kremlin has a long history of falsifying official economic statistics,” the Yale authors wrote.
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Five months after invading Ukraine, Russia’s economy is imploding amid sweeping international sanctions and business exodus, Yale University analysis has found. The analysis, released 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 that it is performing better than expected. Many of these analyses, forecasts and projections rely on Russian government economic releases, which “increasingly raisin-picked, partial and incomplete, selectively discarding unfavorable statistics while maintaining favorable statistics,” the Yale team wrote. “In fact, the Kremlin has a long history of falsifying official economic statistics, even before the invasion.”
Russia’s economy has not recovered and is “fluctuating,” the Yale authors noted. They used private Russian-language data sources and sources such as high-frequency consumer data for their analysis.
“What is clear from our analysis is that business pullbacks and sanctions are catastrophically crippling the Russian economy,” the authors write.
One reason Russia seems so resilient is that the Kremlin has been flooding the economy with “artificial liquidity” and propping 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 patently unsustainable, dramatic fiscal and monetary interventions to address these structural economic weaknesses, which has already plunged his government budget into deficit for the first time in years and depleted his foreign exchange reserves even amid high energy prices,” they wrote.
In April, Russian Finance Minister Anthon Siluanov said the country would draw on its emergency fund to cover the deficit. The move, the Yale team wrote, points to a Kremlin “quickly running out of money despite deliberate concealment.”
The report’s authors call on the international community to press Russia over the Ukraine war: “Defeatist headlines claiming that the Russian economy has recovered are simply not factual – facts are that the Russian economy is in every It’s reeling in every respect and at every level, and now is not the time to slam on the brakes.”