US Treasury Department: War against Ukraine causes Russian economy to shrink by 5%

US Treasury Department: War against Ukraine causes Russian economy to shrink by 5%

According to a report by www.businessinsider.de, a U.S. Treasury Department report was released looking at the impact of the war on Ukraine on the Russian economy. According to the report, Russia's gross domestic product (GDP) could be five percent larger without the war. Other sectors of the economy, such as high military spending and the devaluation of the ruble, are also affected.

The investment of $100 billion in the military sector in 2023, representing almost a third of the total planned spending, shows the priority that Russia gives to military engagement. At the same time, planned wage increases in the public sector have been halted, while inflation in the country is at 7.5 percent, well above the central bank's target of four percent.

In addition, the historically high number of emigrants from Russia is another factor that weakens the country's growth potential. In 2022, 668,000 people left the country, weakening the skilled workforce and growth potential.

Overall, the war against Ukraine has a direct impact not only on military spending, but also on the economy, inflation, emigration rates and the country's general economic situation. Investment in the military sector, slowdown in wage increases and labor emigration are factors that may affect GDP and long-term growth potential. It remains to be seen how these developments will affect the Russian market and the financial industry in the long term.