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“The actual situation is bad,” says the Russian economist

Russian President Vladimir Putin. Getty Images

  • The “real situation” of the Russian economy is bad, Russian economist Igor Lipsits told Reuters.
  • The rosy announcements from Russian authorities are aimed at making the Kremlin happy, he said.
  • Around 14% of Russians live below the poverty line or are on the verge of poverty, he added.

The Kremlin has painted a rosy picture of the country’s economy despite numerous Western sanctions – but “the actual situation is bad,” Igor Lipsits, a prominent Russian economist, told Reuters.

Official rosy statements about the Russian economy are not a good indicator of the development of the Russian economy as the authorities are only trying to make the Kremlin happy, Lipsits added.

The economist confirmed the comments to Business Insider.

Lipsits’ comments shed some light on Russia’s seemingly robust war economy, which is booming thanks to massive military and government spending. The phenomenon baffles many economists who expected a crash after Moscow’s invasion of Ukraine in February 2022.

Russia’s gross domestic product grew 5.5% year-on-year in the third quarter, reversing a 3.5% decline in the same period last year, official estimates show.

But growth is not leading to prosperity for many local Russians.

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

It doesn’t help that Russia’s central bank has raised its key interest rate to 15% to support the weak ruble, which has fallen 16% against the dollar this year – meaning many people are taking on more debt.

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

Around 20 million people in Russia – or 14% of the population – are on the verge of poverty or are already in poverty, Lipsits said.

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

Lipsits told Reuters he expects at least economic stagnation and a serious slump after the presidential election in March. Incumbent President Vladimir Putin is expected to win the election.

Lipsits, who lives outside Russia, was a professor at the prestigious HSE University in Moscow. He left the institution on September 1 after school management unilaterally terminated his remote work contract, he announced on Telegram.

Lipsits is known for writing Russia’s economics textbook, which high school students used for two decades. Russia’s Education Ministry dropped it in 2019 after its experts decided some of its content was not patriotic enough.

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