Vladimir Putin’s Russia is facing an increasingly rocky economic outlook, the report suggested (Image: GETTY)
Russia’s economy is showing increasing signs of strain more than two years on from ’s invasion of , with one insider gloomily admitting: “The market is dead”.
Prices for essentials such as milk, potatoes, and butter are soaring, hitting ordinary Russians hard, according to a report produced by Western-aligned Russian broadcaster .
So serious is the situation becoming that retailers are even having to tighten up resorting security to combat shoplifting, while surging rates have caused a collapse in new apartment sales.
Such issues reflect deeper economic turbulence, with the Central Bank battling to curb inflation as the costs of war and sanctions mount.
The once-resilient economy, previously buoyed by wartime production and government spending, now faces stark challenges.
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Foreign Secretary David Lammy (Image: Getty)
Since February 24, 2022, has prioritised military spending, funnelling resources into tank production, missile manufacturing, and uniforms.
This is turn boosted has spurred GDP growth, with the government sending cash to poorer regions through high wages for volunteer soldiers and compensation to war widows.
However, the flip side of this mobilisation is a phenomenon referred to as an “overheated economy” in which inflation is rampant.
Additionally, the Central Bank’s key climbing to a 20-year high of 21%, borrowing costs are stifling businesses and consumers alike.
Corporate bankruptcies are becoming a real concern, as companies face a shrinking labour market and rising wages while struggling to stay competitive.
The woes of the real estate sector underline the parlous state of ’s economy. As rates soar, the housing market has effectively ground to a halt, prompting one real estate agent to reflect: “The market is dead.”
High have also deterred corporate investment, with Kremlin-aligned oligarchs openly criticising the Central Bank’s policies.
Sergei Chemezov, a close ally of Putin and the head of state-run Rostec, has warned that such policies threaten to stifle industrial growth, while other executives have likewise cautioned against stagflation – a hazardous blend of stagnant growth and persistently high inflation.
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Looking ahead, experts forecast a sharp slowdown in economic growth by 2025, compounded by potential declines in investment. While the Central Bank insists inflation will ease in the coming months, some analysts believe further bankruptcies and economic pain are inevitable.
Labour shortages, rising debt, and wavering corporate confidence paint a downbeat picture for ’s economic trajectory.
Janis Kluge of the German Institute for International and Security Affairs said: “For almost three years, it seemed like everybody was getting rich in this war.
“But now, it becomes clear that this is not going to happen, and there is a price to pay.”
The war has triggered sweeping Western sanctions, cutting off from key international markets and limiting access to advanced technology, essential for sectors like energy and manufacturing.
The UK Government today announced sanctions against 30 ships in ‘s shadow fleet which it says were responsible for transporting billions of dollars of oil and oil products in the last year.
The war effort has also strained public finances, with massive spending on military production, soldier salaries, and compensation payments, which, while boosting some regional economies, has overheated the national economy.
Labour shortages, caused by military mobilisation and the flight of hundreds of thousands of skilled workers abroad, have compounded the issue, forcing businesses to raise wages and grapple with reduced productivity.