A Year of Sanctions

Anticipations and concerns of Russians for 2023

27 January 2023


Russian citizens are facing unprecedented hardships in indicating their expectations and the challenges they may face in the new year. Before overcoming the challenges of the Covid-19 pandemic, Russia launched its special military operation in Ukraine. The sanctions imposed by the West caused additional heavy burdens on the Russian economy and affected several aspects of citizens’ lives. At the same time, citizens are trying to adapt to fresh challenges while working to improve their living conditions regardless of any factors. 

Mitigating Economic Distress

Although Russia’s economy began to recover in mid-2021 from the Covid-19 pandemic, the current economic situation is still unstable. For example, Russia’s gross domestic product (GDP) grew by 3.5% year-on-year in the first quarter of 2022 but compared to the fourth quarter of 2021; it plunged 19.2%. 

The situation was no better for the real disposable incomes of citizens. According to data published by the Russian Federal State Statistics Service, real disposable incomes shrank by 1.2% in the first quarter of 2022. While the decline in Real disposable incomes in Russia fell 0.8% in the second quarter of 2022, it worsened again in the third quarter of the same year. 

Overall, from January to September 2022, the real GDP declined by 1.7% year on year. In the meantime, the Russian ministry of economic development forecasted the country’s real disposable income to decline by 2.2% in 2022 before it grows back by 1.6% in 2023. 

Notably, the share of wages and social subsidies went down while the share of income from trade and property increased. The All-Russia Research Institute of Labor noted that the decline in the real GDP was caused by the impact of the Covid-19 pandemic and the impact of the economy’s inflationary adaptation to mitigate the sanctions, especially the disruption in supply chains and the suspension of operations of some major foreign companies in Russia.

Neo-Norm

The tough western sanctions targeting the Russian economy led to a whole new reality. Trade between Russia and many of its partners, such as Germany and other European countries, was suspended. Moreover, the sanctions tightened the noose on Russia’s economic relations with other countries that fear being targeted by any sanctions if they violate the measures against Russia. Generally, these sanctions also impacted Russia’s production capacity in sectors relying on western-made equipment and spare parts. On top of that come the financial complications from freezing Russia’s assets in the West, the ban on US dollar banknotes exported to Russia, and the consequent Russian response to these measures, resulting in Russian restrictions on trading in Euro and USD on the domestic market.

The sanctions severely impacted the economic situation and social activity that prevailed for the past two decades. For example, the sanctions caused the collapse of the ruble and soaring inflation. Many Russians lost their jobs after many multinational companies exited the Russian market. Moreover, a blanket flight ban on Russian planes and restrictions on issuing Schengen visas deprived many Russians of their usual tours in European cities, including during the Christmas season. The measures also restricted Russian tourists’ ability to travel to their favorite destinations in Egypt and Turkey because of the soaring cost of air tickets and the longer flights after several countries shut their airspace to Russian aircraft. 

In statements made in 2022, the head of the Russian central bank Elvira Nabiullina, noted that Russia’s economy is going through hardships resulting from structural changes related to the sanctions. She said the situation would continue for over one year and could even worsen. Nabiullina emphasized that even if this would be the case throughout this period of structural changes, they cannot be abandoned. 

Six Governing Rules

At a meeting in mid-December 2022 with the Council for Strategic Development and National Projects, President Putin announced that a number of sectors would be developed in 2023. Experts say that the development agenda outlined by the president aims to alleviate people’s concerns about their future.  

In his address to the meeting, Putin stressed that the economic situation will be under control and that plans for the new year were developed amid “an unprecedented sanctions aggression” launched by the West to “crush the Russian economy.” He stressed that it “is common knowledge” that “this plan has fallen through” and that the Russian economy is recovering. 

While Putin did not deny that a federal budget deficit of about 2% of the GDP is expected, he stressed that the government would retain its responsible fiscal and macroeconomic policy to guarantee social commitments’ full funding.

Putin emphasized that his country will continue the development process “regardless of any foreign pressure.” He also announced new projects to upgrade Russia’s technological status and ensure economic, financial, technological, and personnel sovereignty. 

He outlined six key tasks that will be carried out in 2023 to achieve this goal. The tasks aim to: 

  1. Expand cooperation with key partners to a new level in energy, food, logistics, finance, and high technology sectors. 
  2. Enhance technological sovereignty and ensure faster growth of the processing industry. 
  3. Ensure the financial sovereignty of our country, secure resources, and make them more accessible to the projects of the new economy for building high-tech enterprises and producing products with high added value. 
  4. Carry out forward-looking infrastructure development. 
  5. Reduce poverty and inequality and improve income to ensure those working can cover their expenses. 
  6. Protect maternity and childhood and support families at all levels.

2023, Year of Concerns!

2022 was a challenging year for a majority of Russians who were left with concerns over the new year. Polls and studies are conducted at the end of every year to explore public opinion and the public’s expectations for the new year. 

One such study conducted in December 2022 by the National Agency for Financial Studies and Insurance House VSK showed that a majority of Russians (92%) have concerns about bad events that can happen in 2023 that are mainly related to jobs, income, and the financial situation. 

According to the poll, 29% of respondents expressed concerns over inflation and rising prices, while 27% said they feared their income would decline in the new year. Furthermore, 11% of the respondents said they were concerned about their inability to pay off loans on time, while 9% said they feared being fired in the new year. Moreover, 20% of respondents feared a new pandemic would break out. 

Regarding security, the study shows that Russians are not concerned about the possibility of a nuclear war, but 18% of them said they have concerns about terror attacks. Only 10% of the participants expressed concerns about food and medicine shortages, while 8% said they did not have any concerns about the new year. 

The expectations of Russian citizens for the new year were explored by a study conducted by a government-run insurance company and Otkritie Bank. The study results show that 73% of Russians wish, first and foremost, for good health for themselves and others. 42% of participants said they wished for peace and harmony, while 36% wished for peace of mind. Additionally, 35% of the participants said they wished for more money, while 20% said they wished for good jobs for themselves and others. 

The study also explored Russians’ financial expectations and plans for the new year. The study shows that a majority of Russians have plans to save money, with 75% saying that they do not plan to apply for any loans, while 71% said they would work on saving money. Only 23% of them said they would be richer in 2023. The optimists live mainly in Siberia (33%) and the Urals (30%), while those who turned out to be pessimistic live in Saint Petersburg (12%) and the Northwestern Federal District (15%). Another 17% of the respondents believe they will become poorer in 2023 (22% of them live in the Russian Far East and 12% in the North Caucasus. Lastly, 29% of the participants said their financial situation would remain unchanged in 2023.