Russia's Economy - A Deep Dive

About this Video

• Video Title: Russia's Economy - A Deep Dive
• Channel: Infranomics
• Speakers: One unnamed speaker
• Duration: 00:29:10

Introduction

This video provides a data-driven analysis of the Russian economy in 2025. The speaker examines key economic metrics, including labor market indicators, current and fiscal accounts, trade balances, GDP components, military expenditure, inflation, interest rates, and the bond market, to assess the overall health and potential future trajectory of the Russian economy. The analysis also considers the impact of the war in Eastern Europe and related sanctions.

Key Takeaways

• Low Unemployment and Labor Force Participation: Russia boasts a low unemployment rate (2.2%) and a labor force participation rate similar to the US (around 63%).
• Current Account Surplus: Russia maintains a significant current account surplus (approximately 3% of GDP), primarily driven by a trade surplus in energy exports. This contrasts with the US's "twin deficit" (current account and fiscal deficits).
• Fiscal Deficit: Russia operates with a relatively small fiscal deficit (around 1.7% of GDP), partially offset by the current account surplus.
• GDP Composition: A significant portion of Russia's GDP originates from services (56%), with manufacturing, mining, and utilities contributing another 30%. Government administration's share of GDP is increasing.
• Energy Dependence: Energy exports comprise 60% of Russia's exports, making oil prices a critical factor in its economy. Lower oil prices significantly reduce revenue.
• Military Expenditure: Military spending is substantial (about $150 billion USD annually), representing a significant portion of Russia's GDP (7%), more than double the US's share.
• High Inflation and Interest Rates: Russia experiences high inflation (9.4%) and correspondingly high interest rates to combat it. Real GDP growth is slowing.
• Inverted Yield Curve: Russia's bond market exhibits a deeply inverted yield curve, suggesting investor concerns about the government's solvency and potential political instability. The curve's subsequent uninversion in mid-2025 may signal the market pricing in an end to hostilities.
• Ruble Exchange Rate: The ruble has weakened significantly against the dollar over the past two decades but has shown resilience in the face of sanctions.
• Capital Rotation: The video illustrates a capital rotation event in 2022, where investors sold off Russian assets (bonds and stocks) and the ruble, fleeing the country due to geopolitical risks.
• Low Debt-to-GDP Ratio: Despite fiscal strains, Russia's debt-to-GDP ratio remains relatively low (9.4%), in stark contrast to the US (125%).
• Wage Growth: While wages outpace GDP growth in Russia, their purchasing power relative to the money supply is declining.