Russia's economy in crisis: Inflation shock and emigration threaten!

Russia's economy in crisis: Inflation shock and emigration threaten!

Russia's economy is facing serious challenges, which is expected to contract by 5% in 2024. This forecast is based on independent inflation estimates that differ significantly from the official framework. While the official figures speak of an inflation rate of 9 to 10%, experts estimate this to be almost 20%, which further exacerbates the already tense economic situation. Loud fuw.ch Russia's National Prosperity Fund has lost significant value since 2020 and state-controlled bank loans flow predominantly into the defense industry.

The signs of a possible banking crisis are increasing. High inflation and structural weaknesses in the banking sector increase the risks. Some economists warn that dependence on the war economy is unsustainable. While the official GDP figures show growth of 4.1% last year, experts question these as exaggerated. The International Monetary Fund forecasts growth of 1.5% for 2024, but the outlook is becoming increasingly cloudy due to a lack of government spending in other areas.

Mobilization and its consequences

Another factor affecting Russia's economic situation is the partial mobilization declared by President Vladimir Putin. The conscription of civilians into military service in Ukraine is leading to a severe shortage of workers on the Russian labor market. Loud finanzmarktwelt.de Hundreds of thousands, including many well-educated professionals, have left the country since the war broke out on February 24, in what has been described as a great exodus.

Statistics speak of 216,000 official departures in the first half of the year, while unofficial estimates sometimes put up to 500,000 departures. The mobilization affects about one in every 100 active workers in Russia and is exacerbating already low unemployment by making it more difficult to recruit new workers.

Fiscal measures and future prospects

The mobilization not only has a direct impact on the labor market, but also strains the finances of affected families and could negatively impact consumer sentiment. Forecasts suggest GDP could fall by around 0.5% this year, while the Russian government expects a decline of around 3%. Bloomberg Economics warns that the mobilization could both deepen the GDP decline and fuel inflation.

In addition, the Russian government plans to increase income taxes to cover the costs of the war and promises to increase benefits for the families of conscripted soldiers. In the long term, mobilization and the high number of war deaths could reduce the labor force and lead to a dangerous “brain drain”.

Economic challenges arising from both internal and external factors make the future of the Russian economy appear increasingly uncertain.