The last few weeks have been mixed for the Russian currency. The ruble recovered earlier this month, sparking concerns that Western sanctions on Russia may not work. However, analysts said it did not reflect the strength of the economy, but rather the Kremlin’s tight controls on its financial system and strict export rules. Anders Åslund, an economist and former adviser to the Russian government, wrote on Twitter in February that, as a result of Russia’s invasion of Ukraine, “Vladimir Putin destroyed the ruble.” Economist Daniela Gabor also wrote on Twitter earlier this week: “Guys, with capital controls, I can fix the currency at any price I want,” indicating that the ruble’s recovery is not sustainable. The Institute of International Economics expects Russia’s gross domestic product – the most common measure of an economy – to shrink by 15 percent this year, eliminating 15 years of growth. Capital Economics, a consulting firm, expects Russia’s GDP to shrink by 12 percent and unemployment to almost double from 4.1 percent to 8 percent. Goldman Sachs believes that sanctions and “self-sanctions” by Western companies will cause a 20% drop in Russian imports this year and a 10% drop in exports. Meanwhile, ordinary Russians seem to be feeling the sting as a result of sanctions. The Telegraph reported that consumers in the country have cut spending by a tenth, adding that this could indicate that a deep recession is on its way. Expenditures fell 9.7% in early April compared to the same period last year, as household purchases fell at their fastest pace since late 2020, live data from Sberbank analyzed by Capital Economics show. READ MORE: Putin described as “completely delusional” for warning Finland and Sweden On Sunday, the World Bank said Russia’s economy would shrink by more than a tenth this year, while Ukraine’s would shrink by almost half. He said the Ukrainian economy would shrink by 45.1%, while Russia’s would be 11.2% smaller by the end of the year. The situation in Ukraine also threatens to have a major impact on Europe’s economies as leaders are pressured to give up Russian gas. German Chancellor Olaf Solz said his country was doing everything it could to wean itself off Russian energy, but refused to support Prime Minister Boris Johnson’s claim that it would stop importing Russian gas by mid-2024. Germany receives about 55 percent of its natural gas from Russia, the largest volume of any EU country, and consequently the largest share of any major European economy. Some in Berlin are nervous about the loss of Russian gas – a source close to the German government told the Guardian this week: “What good is a weakened Germany to anyone?” DON’T MISS “Paranoid” Putin faces “potential coup” after ax of 150 spies [INSIGHT] ‘It was a pleasure!’ A captured British fighter was captured by Russians [ANALYSIS] Putin gave “another damn nose” [INSIGHT] Germany’s relationship with Russia was under the microscope long before the invasion of Ukraine, and former Chancellor Angela Merkel’s legacy may be viewed differently as a result of the invasion of Ukraine, according to some experts. Ms Merkel was known for trying to use economic ties as a way to reach out to Putin. This included the Nord Stream 2 gas pipeline, which began construction in 2018 under Chancellor Merkel, but is considered a controversial project, which was intended to bring additional gas from Russia to Germany via the Baltic Sea, sailing countries such as Ukraine and Poland. Ms Merkel has maintained her support for the gas pipeline despite concerns in other parts of Europe. However, Mr Scholz put a brake on this new pipeline earlier this year in response to Russian aggression against Ukraine.
