The News
Russia’s economy is overheating thanks to war spending and labor shortages nearly three years into its full-scale invasion of Ukraine.
The country’s central bank has pushed interest rates to 21% to slow galloping inflation, which is still running well above its 4% target: Butter prices are up 26% year-on-year, and some shopkeepers have resorted to locking away the staple to prevent theft, the Financial Times reported.
SIGNALS
Western sanctions are biting hard
Russia’s economy has been so hard hit by Western sanctions that the chief executive of its state-controlled weapons producer has now publicly warned that domestic industrial companies face bankruptcy, and some firms are falling back on Soviet-style barter, the Financial Times’ European economics commentator wrote. There’s guarded optimism in Moscow that the return of US President-elect Donald Trump to the White House might loosen sanctions or bring an end to the war, but another round of tariff wars between China and the US risks hurting its growth prospects regardless, independent Russian outlet The Bell noted.
Russia unlikely to change course despite grim economic outlook
A draft three-year budget submitted to the Russian Parliament in September outlined plans to further hike military spending by 13% from 2024, which highlights both Moscow’s readiness to continue the war and its tacit acknowledgement of the costs of rebuilding the army, an expert from the Carnegie Endowment of International Peace told The Kyiv Independent. Still, Russia’s economic woes seem likely to only get worse: Toughening up restrictions on migration amid anti-migrant sentiment will make labor shortages worse, and sanctions are making it difficult to secure high-tech machinery. Ending the war, meanwhile, could cause a drop in real incomes for much of the population, fueling unrest, a finance expert argued for the Atlantic Council.