Russia's economy in for a bumpy ride as sanctions bite

Image source, Avtovaz

It's the cheapest car in Russia. The car is called the anti-sanctions car.

Russian state TV put a positive spin on the new Lada rolling off the production line in Togliatti.

Its only selling point is "most affordable" The Russian car company can't import all the parts it used to. Lada Granta has no seat belt pretensioners, no anti-lock braking system, and no Electronic Stability Control.

The Russian economy is still functioning nearly four months after the invasion of Ukraine.

It's an achievement to still functioning. Russia has the most sanctions in the world. More than 10,500 restrictions have been imposed on Russians. The last four months saw the implementation of more than 7,000 of them.

The experts had predicted that the wheels would have come off the Russian economy by now.

• Inflation in May was 17.1%.

• The retail trade is expected to fall.

• In May, car sales fell.

• Russian GDP is expected to fall in the years to come.

• The IIF has an unofficial forecast of GDP collapsing.

Chris Weafer of Macro Advisory in Moscow says that international sanctions would cause economic collapse if they came out of the blue.

Russia has experienced sanctions on anIncremental basis. There is an element of this being something they have already been dealing with.

Russia has been earning more money from exporting energy and raw materials because of the fear of supply disruptions. The current account surplus was $110 billion in the first five months. It can use that money to subsidise state industries so that unemployment doesn't go up and incomes don't go down.

The rouble has strengthened due to capital controls. A deep recession is on the way. The Russian economy is expected to shrink in the year 2022.

Russian consumers are still in the dark. Some imported items are no longer available in Moscow's supermarkets.

In Moscow's malls, the change is most obvious. Shopping Centres used to be busy, but now they are less busy. Foreign brands have stopped operations in Russia because of the invasion of Ukraine. Shops are closed.

Image source, EPA

Nikita is a taxi driver. He thinks there will be a rough road for the minicab company.

Taxi companies need to change them very often because they get old very quickly. The car prices in roubles became very high after the war began. There will be no new cars in the near future. Old ones will have to be used.

The anti-sanctions car could be a solution. Nikita isn't rushing to purchase one.

He says that the Lada Granta is small and uncomfortable even with an air bag.

Economic troubles at home could make the Kremlin think. Maybe they will bring an end to Russia's offensive inUkraine. Is the sanctions doing anything?

Chris Weafer believes that if the goal is to create an economic and financial crisis, then it is not possible.

Image source, Getty Images

Russia did not experience a crisis. It is going into a period of economic decline. You are facing a stark reality by autumn and winter. When Europe's ban on imports of Russian oil and oil products kicks in, the government has to reduce spending. Russia will have two to three years of stagnant economic activity. Is that going to last 10 years?

Russia is unable to replace a lot of Western technology imports. China has made it clear that it won't supply Russia with technology that's been blacklisted by the US.

There is no reason to think that Russia's economy will not work. At a lower level of technology and efficiency, it will be able to do so. There will be a larger gap with the rest of the world. Russia's economy won't be the leader.