New US report on the consequences of the war: Russia’s economy collapsed very badly

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Kremlin boss Vladimir Putin (71) recently said in his speech at an economic forum in Moscow that the Russian economy will grow 3.5 percent this year, following a 2.1 percent decline. His message is clear: The West has failed with its sanctions. While isolation makes Russia a new growth center, the West is falling further and further behind.

As the Financial Times writes, now the US Treasury Department is countering with a report on the development of the Russian economy since the beginning of the war in Ukraine. According to this report, if there was no war, Russia’s gross domestic product would be 5 percent higher today.

Government supports growth

Just two days ago, Putin praised the Russian economy in front of the media: The economy grew by 5.5 percent in the third quarter. The manufacturing sector is up 7.5 percent so far in 2023. Wages increased by 8 percent and unemployment was at a historical low of 2.9 percent. The only unpleasant thing is high inflation, which is expected to reach 8 percent by the end of the year. But necessary precautions will be taken.

Since the outbreak of war, the Russian economy has proven much more resilient than most experts predicted. But Putin is counting on a dangerous mix for current growth. The Kremlin is pumping more money into the economic cycle now than during the Covid pandemic. Defense spending will almost double to 6 percent of GDP by 2024. Much of the growth can be attributed to the booming war industry. The government is also increasing social spending due to the upcoming elections. Russia’s economy now risks overheating rather than collapsing.

This poses a threat if the economy overheats

There is just a lack of workers. On the one hand, many soldiers are missing. Additionally, several hundred thousand people have emigrated since the start of the war, most of them well-educated.

If the economy is really hot, this could initially trigger inflation. Because in this case the demand will be significantly greater than the supply of goods. This could lead to a financial crisis.

Source :Blick