Posted 12/10/2023, 4:39:20 PM
Russia's War Economy Overheats as Inflation Nears 7.5%
- Inflation in Russia is accelerating again, nearing 7.5% year-on-year in November 2022 as the war in Ukraine continues.
- The root cause is overheating of Russia's wartime economy due to soaring government spending on defense and social payments.
- The fiscal stimulus is estimated at 5% of GDP, fueling strong economic growth even as supply has contracted due to workforce exits.
- Demand is outstripping supply, driving up prices for inputs like materials, capital, and labor. Workers are getting 15% nominal pay rises.
- Putin is prioritizing winning the war over economic stability, so there is potential for spending and inflation to rise further.