(Foreign Affairs) The Long-Term Costs of the Ukraine War Will Be Staggering. fter Russia’s invasion of Ukraine in February, the Russian economy seemed destined for a nosedive. International sanctions threatened to strangle the economy, leading to a plunge in the value of the ruble and Russian financial markets. Everyday Russians appeared poised for privation.
More than eight months into the war, this scenario has not come to pass. Indeed, some data suggest that the opposite is true, and the Russian economy is doing fine. The ruble has strengthened against the dollar, and although Russian GDP has shrunk, the contraction may well be limited to less than three percent in 2022.
Looking behind the moderate GDP contraction and inflation figures, however, and it becomes evident that the damage is in fact severe: the Russian economy is destined for a long period of stagnation. The state was already interfering in the private sector before the war. That tendency has become only more pronounced, and it threatens to further stifle innovation and market efficiency. […]
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