The Bear’s Market
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Global economic growth will reach only three percent this year due to the lingering effects of Covid-19 and the economic ructions of the Russo-Ukraine War – think higher energy, food prices and other goods. Next year, for the same reasons, growth is expected to slow to 2.2 percent and inflation is likely to continue to climb, according to the Organization for Economic Cooperation and Development (OECD).
“The war, the burden of high energy and food prices, as well as zero Covid-19 policies from China, mean that growth will be lower, and inflation will be higher and more persistent,” OECD Secretary-General Mathias Cormann told the Associated Press recently.
These trends will likely be a blessing and a curse for Russia. Western sanctions imposed to punish Russia for invading Ukraine in late February have devastated Russian industries like automobiles and information technology.
To make matters worse for Russian President Vladimir Putin, a top Russian economist recently warned that the country’s economy will collapse in the next few months because of Putin’s mobilization of 300,000 troops to bolster Russia’s war effort in Ukraine. Security forces have arrested more than 2,300 people for protesting against the mobilization. Tens of thousands of men have fled the country to avoid serving.
Those who do answer the call see the deficits of the Russian army first-hand, potentially further undermining the war’s popularity at home, added Bloomberg columnist Leonid Bershidsky. Russian stocks recently fell to their lowest values since the invasion because of concerns about the mobilization.
Still, other Russian sectors are flourishing. Increased oil exports to China, India and other countries that are ignoring Western sanctions, as well as generally rising energy prices will boost Russia’s revenues from energy exports this year to almost $340 billion, a nearly 40 percent rise compared with last year, reported Reuters.
The US and other countries are looking to undercut some of Russia’s gains, however. For example, Western officials want to identify Russian diamonds as “blood diamonds,” the Moscow Times wrote. Russia produces around a third of the world’s diamonds, a business that in 2021 was worth $4.5 billion to the country.
Ultimately, the market might decide. As Foreign Affairs noted, Russia might have cut off energy supplies to Europe, triggering economic hardships for important NATO members like Germany, but its energy embargo can only work once. The Germans and others are even now working hard to diversify their energy portfolio so that they won’t need so much Russian gas in the future.
The costs of the war, in other words, keep mounting.