Resembling the economic model of the Soviet Union, the Russian economy will continue degrading in 2023. Moreover, Putin can fulfill his task of maintaining the regime, where no person can substitute him like rulers of the Soviet Union did in the past.
The sanctions imposed on the Russian Federation by Western countries have made it impossible for Russia to purchase what it needs. Vladimir Putin has managed to isolate Russia from the world like Soviet Union leaders did in the twentieth century.
The invasion of Ukraine has damaged Russia, depending on gas and oil export. Notwithstanding high oil and gas prices at the beginning of the year, many countries adapted to this situation quickly, moving around supplies and increasing their export capabilities, like the United States of America.
The price of Urals crude oil extracted in Russia has fallen more than 40% from its 2022 peak. Nowadays, the country could experience a deficit of resources to minimize the impact of the impending recession on its people.
It implies that the economy of Russia will face a severe crisis. The International Monetary Fund predicted in 2021 that the economy of the Russian Federation would increase by 2% in 2023. However, the agency has recently estimated that the GDP of Russia will fall by 2.4% after decreasing by 3% in 2022. Considering the rouble’s exchange rate in 2021, it will turn into approximately $200 billion in lost GDP.
It will aggravate the current financial problems of the country. It was a dramatic increase in government spending in 2022 because of Russia’s rise in defense expenditures, which economists of the Bank of Finland estimated at approximately $53 billion. It also means that it will be more and more challenging to keep the Russian rouble convertible into currencies of other states.
Vladimir Putin has toughened the state control over the economy, urging to sign off on selling the assets by companies from Western countries in the spheres of energy and banking. Companies and banks owned by the state and oligarchs affiliated with Putin have purchased industrial and banking assets cheaply, and many analysts have already predicted the intensification of the trend.
Since business in Russia is far from inspections of investors from a foreign state, it will have enough courage to take the deeply rooted corruption to new levels. Thus, Putin can fulfill his task of maintaining the regime, where no person can substitute him, forcing Russia to turn into the Soviet Union, an isolated state with state-owned companies.