“Putin’s invasion of Ukraine caused an economic boom in Russia built on state stimulus. Almost three years later, there are signs that it will soon be time to pay the bills.”, — write: epravda.com.ua
Putin’s invasion of Ukraine caused an economic boom in Russia built on state stimulus. Almost three years later, there are signs that it will soon be time to pay the bills. Bloomberg writes about it. The mood in Moscow and other cities remains high, with restaurants packed and luxury stores packed, but the combination of record high interest rates and persistent inflation increasingly threatens forecasts for another year of slower but still war-fueled growth. “The relatively good period for the Russian economy, which was based on previously accumulated resources, is over,” said Oleg Vyugin, an economist and former senior official of the Central Bank of the Russian Federation.Advertisement: In addition, Russia faces sanctions, a recently weakened currency, a cloudy outlook for prices on oil and the prospect that its largest trading partner, China, will not be able to shake off its own significant economic difficulties. The central bank forecasts a sharp decline in growth to 0.5% in 2025, down from 3.5%-4% last year, and sees inflation returning to its 4% target only in 2026. So far, the economy has managed to grow despite outside efforts, and along with high wages, this has helped soften public opposition to the war.Advertisement: Any pain from rising prices is felt unevenly by Russians, in part because labor shortages have pushed up wages. Even the largest companies are reviewing their strategies. State-owned pipeline operator PJSC Transneft and JSC Russian Railways have sharply cut investment programs, partly due to borrowing costs. Private companies such as the Severstal steel company and the Norilsk Nickel mining company are also cutting costs, while United Co. Rusal International, a leading aluminum producer, is considering cutting production by more than 10%, citing the economic situation as one of the reasons. Falling oil prices are one of the biggest risks to the economy in 2025. If the price falls even lower, the state will be forced to make sacrifices. Ukraine, meanwhile, has cut off natural gas transit through its territory, and while the economic effect is likely to be muted, it could still cost Russia between 0.2% and 0.3% of gross domestic product, according to various analyst estimates. Read also: Everything is not good. What kind of economy is Russia entering 2025 with?