The Russian economy is in bad shape, no matter what the Kremlin says: Russian economist

The Russian economy is in bad shape, no matter what the Kremlin says: Russian economist
Russian President Vladimir Putin.Getty Images
  • The "real situation" in Russia's economy is bad, Russian economist Igor Lipsits told Reuters.
  • Russian authorities' rosy announcements are aimed at making the Kremlin happy, he said.

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.

Official rosy pronouncements on the Russian economy are not a good gauge of how the Russian economy is doing because authorities are just 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 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 invasion of Ukraine in February 2022.

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, official estimates show.


But the growth isn't 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 that has slumped 16% against the dollar this year — which means that 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.

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


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

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

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

Lipsits is known for writing Russia's economics textbook that 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.