On December 22, Russian President Vladimir Putin, while in the Kremlin and answering questions from Russian journalists, mainly from state-controlled media, said that, despite Western sanctions, the performance of the Russian economy in 2022 is much better than in the G-20 countries:
"As for the economy, as you know, despite the collapses, devastation and catastrophe predicted for us in the economic sphere, nothing like that is happening. Russia is performing much better than many G-20 countries and doing so confidently. This applies to the main macroeconomic indicators and the GDP."
This statement is false. Many key macroeconomic indicators in Russia are worse than in most G-20 countries.
According to Britannica.com, macroeconomics is a “study of the behavior of a national or regional economy as a whole.” The main macroeconomic indicators are related to three areas: output and economic activity, unemployment and inflation.
The G-20 is an intergovernmental forum that includes most of the world's largest economies, accounting for about 80% of the world's gross product.
To evaluate the statement of the Russian president on the country's economy, we need to look at the leading indicators in three areas of macroeconomics in Russia and G-20 countries in 2022.
Output and economic activity indicators
The main measure of economic activity and output is Gross Domestic Product (GDP), the “total market value of the goods and services produced by a country’s economy during a specified period of time.”
According to Trading Economics, a New York City-based economic official data aggregator, the GDP annual growth rate in Russia as of September 2022 was the lowest of all G-20 countries.
Russia's GDP in the third quarter of 2022 decreased by 3.7%. For comparison, the GDP of the United States and the U.K. over the same period grew by 1.9%, the EU countries by 2.3%, Turkey, China and Canada by 3.9%, and India by 6.3%. The record GDP growth in the G-20 countries was in Saudi Arabia, at 8.8%.
According to the International Monetary Fund (IMF), Russia's GDP in 2022 will decrease by 3.4%, one of the world's worst results. Only seven of the world's 193 countries, analyzed by the IMF, will see their GDP fall lower than Russia's in 2022.
The unemployment rate, “the share of workers in the labor force who do not currently have a job but are actively looking for work,” for October 2022 in Russia, was 3.9%. Compared to other G-20 countries, this is average. In several countries, the unemployment rate is lower, such as the U.S. and U.K. each at 3.7%; Australia, 3.4%; Mexico, 3.3%, and Japan, 2.6%. But there are G-20 countries where the unemployment rate was much higher in October: in the euro zone, it was 6.5%, and in India, 7.8%.
The relatively low level of unemployment in Russia is explained by a long-standing state policy, as a result of which businesses, to reduce costs, do not fire workers but reduce the employees’ wages.
As a result, wages in Russia as of September 2022 decreased by 1.4% year-on-year. This is one of the worst figures for a G-20 country. For example, wages in the EU increased by 2.1%, in Australia by 3.1%, in Canada by 3.1%, and in the U.K. by 6%.
The decrease in purchasing power over time, reflected by the rise in prices, in macroeconomics is called the inflation rate.
As of November 2022, Russia's annual inflation rate was 12% -- one of the highest among the G-20 countries. Only two G-20 countries had inflation higher, Turkey, at 84.39%, and Argentina, at 92.4%.
In the vast majority of the G-20 countries, inflation was significantly lower than in Russia. In the European Union, annual inflation in November was 10.1%, in Australia 7.3%, in the U.S. 7.1%, in India 5.88%, in South Korea 5%, in Japan 3.8%, and in China 1.6%.
Inflation is closely related to the interest rate, the rate at which banks can borrow money from the central bank. The higher the rate, the more difficult it is for businesses in the country to take loans and the more difficult it is to develop the economy.
As of December, the interest rate in Russia was 7.5%, which is also above the G-20 average. By comparison, the interest rate in India in the same month was 6.25%, the U.S. 4.5%, China 3.65% and the European Union 2.5%. In Japan, this rate is negative - minus 0.1%, meaning the lender will have to return to the central bank less money than it borrowed in a year.
A country's ability to borrow from foreign banks depends on the country's credit rating. Investopedia.com gives the following definition of this macroeconomic indicator:
“A sovereign credit rating is an independent assessment of the creditworthiness of a country or sovereign entity. Sovereign credit ratings can give investors insights into the level of risk associated with investing in the debt of a particular country, including any political risk.”
Russia's credit rating is one of the worst among the G-20 countries and the world.
On June 27, Russia defaulted on its foreign debt for the first time since 1918. As a result of Western sanctions for invading Ukraine, Russia's foreign assets were frozen, and the country could not pay interest on its loans. This further alienated the country from the global financial system, and Russia lost the opportunity to take loans and develop its economy.