In brief
The Russian economy is slowing, leading to tensions among economic elites as the currency weakens and businesses face challenges. This may signal a shift toward stagflation as the government continues to finance the war effort.
The wartime economy that Russia activated is hitting roadblocks, causing concerns among its economic leaders as the conflict with Ukraine nears four years. Recent data reveals that many Russian industries have halted growth, and some are even declining. The ruble fell to its lowest value in two years last week, and businesses report difficulties in securing loans or receiving payments.In response, the central bank raised the interest rate to 21 percent, the highest since the Soviet era, to control inflation. It also revised its economic growth outlook for the next year to just 0.5 to 1.5 percent, far below this year’s projections of 3.5 to 4 percent. This slowdown coincides with rising prices, leading experts to warn of potential stagflation—where inflation occurs without growth.Western nations have imposed strict sanctions on Russia over the past three years in retaliation for President Vladimir V. Putin’s invasion of Ukraine, further complicating the economic landscape.
