The overheated Russian economy is about to cool seriously, as the enormous fiscal stimulus, upward interest rates, persistent inflation and western sanctions, take its toll, although after three years of war, Washington could have launched a lifeguard To Moscow.
The president of the United States, Donald Trump, is pressing to achieve a rapid agreement that ends the war in Ukraine, alarming Washington’s European allies when leaving them and Ukraine outside the initial conversations with Russia and blaming Ukraine of Ukraine The Russian invasion of 2022, through political gifts for Moscow that could also bring strong economic benefits. Washington’s pressure comes at a time when Moscow faces two undesirable options, according to Oleg Vyugin, former vice president of the Russian Central Bank.
Russia can stop inflating military spending while pressing to gain territory in Ukraine, he said, or maintain and pay the price with years of slow growth, high inflation and decrease in the standard of living, all of which entails political risks.
Although public spending usually stimulates growth, non -regenerative spending in missiles at the expense of civil sectors has caused overheating to the point that interest rates, 21%, are braking business investment and inflation cannot be controlled . “For economic reasons, Russia is interested in negotiating a diplomatic ending of the conflict,” said Vyugin.
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Russia resists
“(This) will prevent the redistribution of limited resources for unproductive purposes. It is the only way to avoid stagflation. ” Although Russia is unlikely to quickly reduce defense spending, which represents around a third of all budget spending, the perspective of an agreement should relieve other economic pressures, it could be a relief of sanctions and, finally, the return of the Western companies
“The Russians will be reluctant to stop spending on the production of weapons overnight, for fear of causing a recess for its acronym in English).
“But letting go to some soldiers would relieve the pressure on the labor market a bit.”
War recruitment and emigration have caused generalized shortage of labor, carrying Russian unemployment to a historical minimum of 2.3%. The inflationary pressure could also decrease, added Kolyand, since the peace prospects can make Washington less
“The United States has a significant influence on economic terms and that is why the Russians are happy to meet,” Chris Weofer, executive director of Macro-Advisory Ltd. If you don’t do we can worsen things a lot. ”
With Reuters information.
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