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Nilsson emphasized that Russia’s official data already paints a worrying picture for the Kremlin – Russian dictator Vladimir Putin last week noted that Russia’s GDP shrank by 1.8% in January and February, and Russian Central Bank Governor Elvira Nabiullina said the next day that “external conditions are now almost constantly deteriorating – both for exports and imports.”.
However, the Swedish intelligence chief noted that the real situation is even worse, and the Russian Central Bank is underestimating inflation, which, in his opinion, is closer to the key interest rate of 15% than the official 5.86%. Nilsson added that Sweden has agreed with the BND, Germany’s foreign intelligence agency, that Russia is underreporting its budget deficit by $30 billion and has also noticed some financial indicators that could point to a future banking crisis.
Nilsson suggested that Putin may not know how bad the economic situation really is. But even with the false information he receives, in the end, he will not be able to escape reality.
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Sweden believes that Russia is “living in debt” and that the aggressor state’s economy can only fall into one of two scenarios: a long-term recession or a shock. In any case, “it will continue to fall to a financial catastrophe,” said the intelligence chief.
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I’ve been hearing that the Russian economy is failing since the beginning of the war
I posted that already some time ago, and it fits again.
We’ve been hearing this indeed for a long time, and we’ll most likely continue to hear it for a long time in the future. Most economists didn’t predict a sudden collapse in Russia soon after the full-scale invasion of Ukraine.
One of my favourite elaborations is an interview with Russian economist Natalia Zubarevich in 2023 who said back then about her country, ‘There Will Be no Collapses, but Rather a Viscous, Slow Sinking into Backwardness’.
And in a chapter in the 2023 book on “Russia’s Imperial Endeavor and Its Geopolitical Consequences” (highly recommended read), Hungarian scholar Dóra Győrffy concludes (opens pdf):
Although Western sanctions imposed on Russia did not immediately cripple the Russian economy, this does not mean they are ineffective. Russia has lost its most pros-perous markets in the EU for its energy products, while trade reorientation towards Asia faces major obstacles given the limitations of transport capacities such as gas pipelines or shipping. The outlook is even worse for its long-term growth prospects. The sanctions and the war have undermined all major factors of growth including access to capital and technology, the available quantity and quality of labor, the institutional system, and freedom. The war has made Russia a neo-backward country.
The relative certainty of the long-term decline of Russia stands in contrast to the uncertainties surrounding the prospects of post-war Ukraine. While success is far from guaranteed, Ukraine has a window of opportunity to leave its post-Soviet patronal structures behind, and build a resilient democracy, rule of law, and a strong market economy with Western support. The return of refugees, the inflow of Western capital for reconstruction, access to technology, assistance in institution building, and a strong social commitment to the idea of freedom provide a strong foundation for a new Ukraine embedded in the transatlantic alliance. Achieving this vision is the shared hope and responsibility of Ukraine and the West in their fight against autocracies.
The fact that they felt the need to publish this headline makes me think the Russians are printing doing wuite well.