Russia's stock market is performing well on the surface, but experts believe it is an illusion meant to hide the declining state of Russia's economy, which is likely to continue suffering as long as President Putin remains in power.
Investments in Russia's stock market are deceptive and likely to go nowhere as the country's economy spirals downwards under President Vladimir Putin's rule, according to Yale researchers.
Russian President Vladimir Putin stated at the BRICS Summit that the decline in the global role of the US dollar is an irreversible process, emphasizing the bloc's de-dollarization efforts.
Russian President Vladimir Putin has acknowledged the rising risks of inflation and has urged the government and central bank to keep the situation under control, as soaring prices could pose a threat to living standards and his upcoming re-election bid, while Russia's budget is also strained due to its military operation in Ukraine.
The Russian economy is facing several major issues, including a labor shortage, soaring inflation, a tumbling ruble, the risk of recession, a real estate bubble, and the nationalization of foreign businesses, which could lead to stagnation and a fall in GDP growth in the long term.
Russia's Central Bank plans to increase support for the ruble by selling a larger volume of foreign currency each day, in response to an upcoming payment of foreign currency bonds and to reduce market volatility caused by Western sanctions.
The slumping Russian ruble has raised concerns of a potential exodus among Central Asian labor migrants, as their salaries decrease in value and they have less to send home to their families, exacerbating an existing labor shortage in Russia and impacting the country's long-term economic potential.
Sberbank CEO Herman Gref believes that the Russian ruble is undervalued and should be trading at 80 to 85 rubles to the US dollar, contrary to Russian President Putin's reassurances of economic stability.
The Central Bank of Russia has raised its key lending rate to 13% in an effort to combat inflation and stabilize the struggling ruble, which has weakened significantly against the dollar due to decreased exports and increased imports. The country also faces challenges with low unemployment and a brain drain of talent to other former Soviet states. However, the Russian government remains optimistic about economic growth forecasts for 2023.
Double-digit interest rates and the possibility of further hikes are hitting the Russian economy hard, as the impact of higher industrial production and rising defense spending fade, leading to stagnation or decline in household consumption and investment.
Despite facing Western sanctions, Russia has managed to sustain its economy through increased military spending, but questions remain about the long-term viability of this militarization.