cross-posted from: https://feddit.org/post/2778064
Moscow has funnelled billions of dollars to its army, soldiers, their families and weapons makers to sustain its military campaign – a spending splurge that helped it defy Western hopes that sanctions would push it into economic collapse.
But after warning for months that the economy was overheating, the country’s Central Bank has lately started mentioning the possibility of another, possibly more challenging development: stagflation.
“The shortage of (labour) resources may lead to a situation where economic growth slows down, despite all the efforts to stimulate demand, with all that stimulus accelerating inflation,” Central Bank Governor Elvira Nabiullina said over the summer.
“In essence, this is a stagflation scenario, which can only be stopped at the cost of a deep recession,” she warned.
‘De-modernising’
Stagflation – a period of low or stagnant growth accompanied by high inflation – would present a fresh headache for the Kremlin, which has until now navigated the economic fallout of its offensive on Ukraine better than most believed possible.
Moscow has increased government spending by almost 50 percent since sending troops into Ukraine, pushing up growth and wages.
Unemployment is at a record low and consumer confidence is its highest in 15 years.
But an exodus of both skilled and unskilled workers – who fled mobilisation or joined the army – has created millions of unfilled vacancies. Sanctions on Western technology have also hit productivity and damaged supply chains.
“In the long-term these demographic factors and technological issues will result in very low economic growth,” Ruben Enikolopov, a Russian professor at the Barcelona School of Economics, says.
“There is a high probability of a stagflation scenario in 2025 and the years after. It’s not a certainty, but high likelihood,” he added.
Of course, but if Ukraine loses before Russia crumbles, it won’t matter to Ukraine. No one knows how long it will take for Russia to crumble nor if it ever will. China, Iran, North Korea, and Turkey are all supporting it.
Erdogan recently said Russia should return Crimea, but is he willing to sanction Russia? Russia is running out of Yuan, but will China truly stop trading with Russia or will they just accept debt? It’s a very complicated situation and if the West doesn’t allow Ukraine to strike Russia with long range missiles nor provide enough weapons and ammunition to drive Russia back, Russia’s economic woes don’t matter. They don’t matter if Russia wins the war.
What kind of peace deal are you talking about?