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Russia faces stagflation threat as growth slows: Prices for bread have jumped so much over the last few years that Russian pensioners sometimes have to go without (www.france24.com)

submitted 1 month ago by 0x815 to c/europe

19 comments fedilink hide all child comments

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.

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[–] atro_city@fedia.io 8 points 1 month ago (1 children)

This all doesn't matter if Ukraine can't win the war.

[–] Melchior 2 points 1 month ago (1 children)

Russia needs to be able to produce enough weapons to wage war. That is also true for any potential war against EU members, such as the Baltic states or Poland.

Also Russia and Ukraine can both be defeated in the same peace deal. Just look at the British Empire and WW2. The UK one, but it lost its Empire.

[–] atro_city@fedia.io 2 points 1 month ago (1 children)

Russia needs to be able to produce enough weapons to wage war

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.

Also Russia and Ukraine can both be defeated in the same peace deal

What kind of peace deal are you talking about?

[–] Melchior 1 points 1 month ago

Of course, but if Ukraine loses before Russia crumbles, it won’t matter to Ukraine.

There are a lot of countries, which Russia wants to invade besides Ukraine. I mentioned a few and there are a lot more in the Caucasus and Central Asia. Even Ukraine would benefit, even in a total defeat. That would mean underground warfare against Russia and a weak Russia would be hurt badly by that. Ukraine is just much harder to control then Chechnya, if they do not want to be a part of Russia.

China, Iran, North Korea, and Turkey are all supporting it.

No, they mostly just trade with Russia. They are not sending aid. If Russia collapses Iran and North Korea would be unhappy, but they will not intervene. Turkey and China do not care at all. Both of them can benefit from it, if they play it right. I am just saying Central Asia and for China parts of the Russian Far East.

What kind of peace deal are you talking about?

For example one, which freezes the current situation. Russia looses, as a victory was always to take all of Ukraine or at least the territories it claims to be Russian, which it does not control and Kursk. Ukraine also looses as it has already claimed victory would be taking back control over all territory, which is internationaly recognised as being Ukrainian. So both sides have been defeated. That is actually a very likely outcome.