Russian economy: crisis looming – Vjugin sounds the alarm!

Russian economy: crisis looming – Vjugin sounds the alarm!

Oleg Vjugin, the former deputy head of the Russian Central Bank, has made alarming comments about the economic situation in Russia. In his statements he warns of impending bankruptcies of large companies and further rising inflation. His forecasts are very pessimistic: “The party in Russia’s economy is coming to an end,” explains Vjugin. These are strong words in a country that is deeply affected by the effects of the war in Ukraine. Focus reports that…

One indicator of the economic difficulties is the recent move by the Russian central bank to cut its key interest rate to 20 percent. This measure shows that there are serious economic problems in the country. Official inflation figures are already over 10 percent, while prices for staple foods such as butter and potatoes are rising rapidly. Falling budget revenues, particularly due to falling oil prices, have already led to a correction of the budget.

Forecasts and risks

Vjugin predicts that Russia could potentially enter a recession in 2025, pointing to the precarious economic conditions. At 1.7 percent of GDP, the expected budget deficit is difficult to cover and could further destabilize the already fragile economic balance. Vjugin calls for peace to resolve these economic problems, which have been significantly exacerbated by the Ukraine war.

In addition, the political situation in Russia is described as tense. Vjugin emphasizes that there is a fragile balance in the power apparatus, where advocates of economic stability and hardliners of the war apparatus clash. Uncertainty about future political and economic developments remains high, leading experts to make different assessments.

Consequences of the Ukraine war on the German economy

The economic situation in Russia has far-reaching consequences, not only locally but also globally. In a recent report, the Bundesbank analyzed the macroeconomic effects of an escalation of the war against Ukraine. If trade with Russia, especially in the energy sector, were to be stopped, real GDP in Germany could be up to 5 percent lower than the ECB's previous forecasts. Bundesbank reports that...

The analyzes also show that the inflation rate in Germany will be increased in the long term due to rising energy prices. The fiscal environment could deteriorate, which will have a negative impact on private consumption and commercial investment. The risks of inflation, exacerbated by higher commodity prices and possible wage increases, are significant.

In a worst-case scenario, energy rationing under a full embargo could result in a short-term GDP loss of up to 3.25 percent, especially if energy-intensive industries are also affected. The uncertainties in these calculations are high, which represents a clear warning of the economic challenges to come.