According to Władisław Inoziemtsev, over the past two years, Russian citizens and entrepreneurs have recorded significant profits, and bank deposits have increased by 40 trillion rubles, or approximately EUR 420 billion. However, the situation is starting to change.
The economist emphasizes that the state sector, especially defense, does not experience difficulties because the budget provides sufficient funds. However, medium and large private companies have serious problems with sales and exports, and only small enterprises and service companies, including tourism, continue to develop.
Inozemtsev points out that the exchange rate does not currently indicate any serious threats, and the current account surplus remains high. Nevertheless, the social and political mood in Russia is depressing. Hopes for an improvement in the situation that appeared after Donald Trump's telephone conversation with Vladimir Putin in February and their meeting in Alaska in August quickly disappeared. Russians do not feel a lack of money or food, but disappointment due to unfulfilled expectations.
Everyday problems
Among the main difficulties that affect the lives of residents, Inozemtsev mentions three factors.
Firstly, more and more frequent internet failures, which make it difficult not only to use YouTube, but also to navigate while traveling. Secondly, the fuel crisis resulting from Ukrainian drone attacks on refineries and airports. As a result, many Russians had to give up air travel in favor of long road trips, which worsened gasoline shortages. The third problem is mass flight cancellations caused by drone attacks, which prevent spontaneous vacations, business trips or participation in family celebrations.
New taxes and changes for entrepreneurs
From 2026, the VAT rate in Russia will increase from 20 to 22 percent, which is intended to help finance the war.
The government expects additional revenue of 1.2 trillion rubles. Inozemtsev notes that society will not feel this change too strongly because inflation is currently falling.
However, a much bigger challenge is the new tax regulations for small business owners, of whom there are 13 million in Russia. The economist emphasizes that when changes affect selected social groups, reactions are much more nervous than in the case of nationwide problems such as inflation.
Stagnation instead of crisis
The new draft budget predicts economic growth of only 1 percent. this year, instead of the previously assumed 2.5 percent.
Despite the strong ruble and low oil prices, Inozemtsev does not notice the so-called a “perfect storm” in the economy, but rather a state of stagnation. Oil export revenues fell by 21%. during the first nine months of the year, but the VAT increase is intended to compensate for some of these losses.
The economist compares the current situation to the period after the annexation of Crimea in 2014, when economic growth fluctuated around zero.
The lost decade and future prospects
Inozemtsev believes that after a decade of stagnation and the war in Ukraine, Russia may have entered a period of stable growth, but is now heading towards a second lost decade. In his opinion, from the annexation of Crimea to Putin's death, the country was experiencing an era of stagnation, and the short-lived economic recovery was the result of liberalization for enterprises and state funds in the first years of the war.
The escalation of the conflict brought about a situational upswing that has now ended, and any further escalations may only lead to a temporary recovery.
Sanctions and their effectiveness
The economist emphasizes that FrCurrent Western sanctions are not effective enough to seriously harm the Russian economy. In his opinion, in order to cause a real shock, sanctions should be extended to the entire Eurasian Union, which could lead to internal conflicts and a breakdown of the post-Soviet integration process..
Inozemtsev notes that the first sanctions after the outbreak of the war were surprising and severe, which is why they caused a strong reaction in Russia. Gradual extension of restrictions no longer brings such an effect.
The myth of social rebellion in Russia
Inozemtsev also points out that the West should abandon the belief that the deterioration of living conditions in Russia will lead to social revolt.
In his opinion, the war can be financed even in difficult economic conditions, while other expenses will be increasingly difficult to implement.
