Putin Has Ruined Russia's Economy

The analyst named three indicators.

Several factors at once indicate that the full-scale war unleashed against Ukraine is gradually leading to an increasing deterioration in the situation in the Russian economy. And the collapse may come as early as February 2025.

This was told by Ivan Us, Ph.D. in Economics and Finance and Chief Consultant of the National Institute for Strategic Studies (NISS), on the Telegraf UA YouTube channel. He explained which indicators to look out for.

According to him, the preservation of the discount rate by the Central Bank of Russia (CRB) at the level of 21% instead of an increase of two percent is a confirmation that it is politics that drives the economy in the Russian Federation. And this is always very dangerous, because economists calculate what to do to prevent the deterioration of the situation in the temporary lag of two months.

"Ukraine more or less maintains this balance, and in Russia this balance is not very noticeable," says the economist. "A simple example: in Russia's budget for the next year, the costs of war (defense, national security, Regardie and closed articles, also largely aimed at supporting the war) take 71% of state spending.

If almost three quarters of all state spending goes to the military sphere, then according to all laws, if it arrives somewhere, it should disappear somewhere," the expert explains. "This 'expense' occurs in the social sphere, even despite the budgeted inflation of 9.5%."

"We see that they not only do not save social spending (which would already be not enough, given inflation), but, on the contrary, they reduce it. But besides waging war, there is also propaganda that helps this war. And here 4.5 billion rubles are spent on Solovyov, who is the main 'mouthpiece' of Russian propaganda," the Chief Consultant at NISS continues.

According to him, the war economy is started prevailing in Russia, and if a year ago they paid 200,000 rubles for a contract for the war with Ukraine, now it is 3 million. Therefore, representatives of the Russian authorities in the regions complain about the increase in the price of goods, since they pay a lot of money to the military. Markets react and increase prices. But money appears purely in the military, it does not appear in other industries. GDP growth occurs in industries related to the war, but is absent in agriculture, transport, and other sectors of the economy.

"By the way, the most important indication of future problems is the level of transportation in Russia," says Ivan Us. "It shrank sharply in December. And in two months, in February, this lag will 'shoot' and there will be problems immediately. And it was in order to prevent these problems that the Central Bank of Russia wanted to raise the discount rate. Because it is already clear that 21% (I remind you — this is the 12th rate in the world) does not cover the costs."

According to the economist, the Central Bank of Russia wanted to do this, but the day before the announcement of the decision, there was a 'direct line' of Putin, and he made it clear that this should not be done.

"And so politics intervened — the Central Bank of Russia decided: we will not raise the discount rate. Let's see where this leads," the expert says. "After all, if it is [retention of the discount rate], a decrease in transportation and weekly inflation (in Russia, inflation is above 0.35% for five consecutive weeks: 0.37% — 0.36% — 0.5% — 0.48% — 0.35%). Two weeks is almost half a percent, which is 25% annual inflation at the end of the year. Under such conditions, it is not that 23%, there 25% will be small if this is the key rate."

"If in February these already predicted problems 'shoot'," the economist predicts. "The Central Bank of Russia will have to raise the rate, but not from 20% to 23%, but to 25%, and who knows what will happen then.

The history of the ruble at the end of November showed a significant 'swing', when the morning began with the rate of 105.5 rubles/dollar, and by lunch — 114.5. Then they dropped lower and became 102 or 103, but we see that these constant 'jumps' also deal a blow to the Russian economy and therefore a big problem for Russia to really maintain its economic growth.

More and more different components require money. Russia does not have this money, and one of the deputies [Chairman of the Central Bank of the Russian Federation] Nabiulina said: 'As long as the so-called 'special military operation' (as they call the war) continues, there will be no normal situation in the Russian economy'. There is a cross on this," Ivan Us summed up.

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