During my recent trip to Russia, I was pleasantly surprised to see that the country’s economy is flourishing.
Nothing is missing: groceries and other everyday necessities in stores in Moscow. (Picture: Перекрёсток retail chain)
Shoppers in Moscow. (Picture: Felix Abt)
The shops were nicely stocked, the restaurants bustling with customers, the shopping centres lively with shoppers, and unemployment was nearly non-existent.
Moscow’s restaurants and bars are buzzing with activity. (Picture: Felix Abt)
I was really surprised after hearing so much from the Western media about how Russia’s economy had collapsed, like what Newsweek mentioned.
So-called experts also appeared on all channels as prophets of doom for Russia. A U.S. university professor of economics even went so far as to claim in an interview that the game was over for Putin and Russia.
Meanwhile, alleged military experts like former CIA director General Petraeus said in his frequent appearances on the major news networks that Russia was losing to Ukraine and that Russia’s special military operation in Ukraine was a total disaster.
As demonstrated, for instance, by the German Foreign Minister, who claimed that the West as a whole was at war with Russia in the irrational hope that it could prevail,…
…or the US Secretary of Defense, who also pledged a strategic defeat of Russia in the hope that it would become so weak that it would submit to the US, they all revealed the collective West’s wishful thinking.
It all began in 2014 after the violent US-backed Maidan coup against the democratically elected government, when NATO began arming, training and expanding the Ukrainian army and, from 2022, deploying its satellites and other technical means to plan offensives and carry out drone and missile attacks on Russian targets. In reality, a military proxy war and an economic war with 14,000 so-called sanctions against Russia have been going on in Ukraine for some time.
Experts and think tanks continued to belligerently claim that the West was capable of overthrowing Russia and should do so.
Despite the fact that the encirclement of NATO poses a real threat to Russia, the media have launched a campaign of scaremongering, as this Economist headline shows, in order to win the support of the Western population, the majority of whom are against the proxy war against Russia.
As part of their influence campaigns, Western politicians, think tanks and the mainstream media promised that the sanctions would be successful.
But it went terribly wrong. There were problems with NATO’s forced eastward expansion, which aimed to encircle Russia with military bases and missiles that could reach Moscow within minutes. This was supposed to prompt an aggravated and threatened Russia to respond militarily in Ukraine and subsequently lead to its total defeat on the battlefield of the NATO proxy war and in the economy. However, the strategists in Washington have severely miscalculated, since Russia has become more powerful instead.
Western media, which had previously reported on Russia’s inevitable military defeat and economic collapse, are now being forced to revise their narrative as it is no longer credible in the face of overwhelming evidence that the results are not quite what they had hoped.
Even worse is the shocking and worrying result for the collective West, which has failed to destroy Russia economically and militarily: Russia is growing faster than its enemies!
In the meantime, Washington’s Western media partners and allied think tanks have drastically altered the story to give it a different angle on Russia’s demise.
That is why they are now talking about overheating that would lead to a collapse in 2025, instead of emphasizing Russia’s supposedly drastic economic decline. They have postponed the collapse for another year.
But let’s take a sober and unbiased look at what is happening in reality. With a 4% annual growth rate, the Russian economy has surpassed Japan to become the fourth biggest in the world.
The substantial investment boom that supports this expansion is evident while traveling to Russia. Earnings play a role in driving economic investment since the economy is expanding due to robust consumer demand, real wages are growing, and corporate borrowing and lending is at an all-time high, now growing by over 20% annually. The primary source of investment is manufacturing, which includes both new and existing factories. Part of the investment is being channelled into digitalisation and robotics to address the urgent problem of labour shortages. Due to the tense situation on the labour market, wages have risen relatively sharply, which increases input costs and pushes up sales prices.
In order to recruit more labour when the troops return home, Russia, a high-income country according to the World Bank, has an interest in winning and ending the fight in Ukraine as quickly as possible, while the West has an interest in this not happening. In Russia, recruiting foreign workers is not a particularly popular notion. However, to alleviate the crisis in the labor market, Russia is likely to hire more foreign workers from North Korea and other countries in its neighborhood.
It is obvious that such an investment boom will ultimately lead to overheating. Nobody in Russia seems to doubt this. There is disagreement about the strength and dangers of such overheating. Or whether this overheating is necessary to control the economic shift. As manufacturers are unable to meet the increased demand, there are shortages and bottleneckx of many goods, including machinery and other equipment as well as building materials. As already mentioned, the increased prices reflect this.
The Russian central bank, whose head Elvira Nabiullina was nominated by President Putin in 2013, feels that the present more than doubled prices pose a threat to its 4% inflation objective. Even if this is still lower than the inflation rates for almost the whole post-Soviet period, the overheating may eventually turn into a recession. Thus, the central bank’s goal is to slow down the economy. Reducing the investment boom and restoring equilibrium are the equivalent measures it seeks. For this reason, it has increased interest rates to a startling 21%, more than double the rate of inflation. It thinks the economy needs two years to cool, thus it wants to maintain interest rates high at that period.
However, representatives of the Ministry of Economy believe that the Central Bank is using interest rates to suppress the investment boom and the increase in borrowing and lending, which are ultimately the main drivers of growth and enable the implementation of the reindustrialisation programme that the nation most urgently needs. The industrial sector is growing and the productive forces are getting stronger, so this process is already underway. Once the additional factories and equipment are delivered, production will increase and meet demand, so inflation will naturally begin to fall.
Another reason is that given the small budget deficit, which is only about 1% of GDP and differs a lot from the 6% in France and other Western countries, a less restrained approach is justified.
The debate also favours tax increases to reactivate the so-called budget rule, which states that the government retains all profits from the oil and gas industry and spends the money based on revenues from the non-oil and gas sector. It should be noted that the oil and gas sector accounts for only about one-fifth of the total revenue of the budget, or the so-called consolidated budget, which is made up of the federal and regional budgets. However, the percentage of the oil and gas industry is rapidly decreasing even in the federal budget, which is the area of the budget that depends the most on income from this industry. The Western media does not cover this trend.
So an important economic debate is underway in Moscow. The Ministry of Economy, the Ministry of Industry and, to a certain extent, the Ministry of Finance would like to see economic growth continue at the current pace, while the Central Bank would like to see slower, longer-term sustainable growth.
So THAT’S THE WHOLE STORY of what’s happening in the Russian economy. And that’s why there won’t be a collapse next year or the year after, no matter how much Russia’s opponents and their propaganda megaphones in the media long for it.
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P.S.
Why do people in the West believe the propaganda? Because they have been brainwashed for more than half a century.
The relentless Western propaganda against the Soviet Union/Russia has never really stopped since the Cold War. These are some of the covers of TIME Magazine from 1953–1983.
Western citizens are systematically inculcated with anti-Russian propaganda full of hatred, contempt and ridicule. And it will never stop as long as the U.S. elites see Russia as a rival that must be defeated so that it is no longer a “threat”, that is a competitor.
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Related article: No Freedom of Speech in the Russian “Dictatorship”? Exclusive Eyewitness Report from a Protest Near the Kremlin in Moscow
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Watch the author’s Russia travel reports on YouTube:
• Direct from Moscow: Honest Moments and Sounds from the City’s Street Life
• I enjoyed Ukrainian food in an authentic Ukrainian restaurant in the centre of Moscow
• The West tried to destroy Russia — see results! Moscow eyewitness report
• The wonderfully efficient subway is as safe as Moscow itself
• Here to help! Russian businesses go the extra mile to satisfy their customers. Eyewitness report