Russia economy: ‘The real situation is bad,’ says Russian economist

Russian President Vladimir Putin. Getty Images The Russian economist Igor Lipsits says the “real situation” in Russia’s economy is bad.He told Reuters that Russian authorities’ rosy announcements were aimed at making the Kremlin happy.He added that about 14% of Russians were living in or on the brink of poverty.

The Kremlin has been painting a rosy picture of the country’s economy even amid a swathe of Western sanctions — but “the real situation is bad,” Igor Lipsits, a prominent Russian economist, told Reuters.

He added that official rosy pronouncements on the Russian economy were not a good gauge of how the Russian economy is doing because authorities were just trying to make the Kremlin happy.

The economist confirmed the comments to Business Insider.

Lipsits’ comments shed some light on Russia’s seemingly resilient wartime economy, which is booming on the back of massive military and state spending. The phenomenon is baffling many economists, who were expecting it to crash after Moscow’s full-scale invasion of Ukraine in February 2022.

Official estimates indicate Russia’s gross domestic product grew 5.5% in the third quarter from a year ago — reversing a 3.5% decline in the same period last year.

But the growth doesn’t seem to be translating into affluence for many Russians on the ground.

“A large part of the Russian population have very low wages,” Lipsits told the news agency.

It doesn’t help that Russia’s central bank has hiked its key interest rate to 15% to prop up the weak ruble, which has slumped 16% against the dollar this year — which means many people are chalking up higher debt.

Meanwhile, inflation in Russia hit 11.9% last year and is forecast to reach 7.0% to 7.5% this year.

Lipsits said about 20 million people in Russia — or 14% of the population — were on the brink of or already in poverty.

Official statistics suggested that 15.7 million people in Russia lived below the poverty line of 14,184 rubles, or $162 a month, in the second quarter of this year.

Lipsits told Reuters he expected economic stagnation — at the very least — and a serious slump after the country’s presidential election in March. The incumbent leader, Vladimir Putin, is expected to win the election.

Lipsits, who lives outside Russia, was a professor at Moscow’s prestigious HSE University. He announced on Telegram that he left the institution in September after the school’s management canceled his remote-work contract unilaterally.

Lipsits is known for writing the economics textbook that Russia’s high-school students used for two decades. Russia’s education ministry dropped the book in 2019 after it decided some of the content was not patriotic enough.