As of: March 1, 2024, 3:51 p.m
By: Bona Hyun
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Putin's “main engine” of the Russian economy is the war in Ukraine.
The damage caused by the “war economy” is increasing – and is already leaving its mark.
Moscow – Russia is doomed to eternal war due to the economic situation.
Vladimir Putin's government will not be able to withstand the economic pressure for long.
Russia's economy is now so dependent on the Ukraine war that Putin can neither afford to win nor lose the war, economists argue.
Putin's economy condemned to eternal war against Ukraine
A look at the latest economic data shows: After a decline in 2022, the gross domestic product (GDP) in Russia is expected to have increased by 3.6 percent in 2023.
The state statistics office in Russia published figures on this in mid-February.
But the good numbers are deceptive and are seen as an attempt by Putin to cover up problems in the Russian economy.
Russian economic growth during the Ukraine War is mainly due to high government spending.
“Military pay, ammunition, tanks, aircraft and compensation for dead and wounded soldiers all contribute to GDP figures.
Simply put, the war against Ukraine is now the main engine of Russian economic growth,” explains economist Renaud Foucart in an opinion piece for
The Conversation
.
Even a victory could cost Putin dearly in the Ukraine war.
(Archive photo) © Evgenia Novozhenina/dpa
The British economist Roger Bootle argues similarly to Foucart in an article in
The Telegraph
.
Additional spending triggered by a war can give the economy a boost.
This is what happened in Germany in the 1930s.
War production also increased enormously in the USA.
But this type of earning is doomed to failure in the long term.
Russian economy is growing thanks to military spending - but other areas are suffering
Meanwhile, other areas of the Russian economy are suffering from the ongoing war: Russia is facing major challenges due to stubborn inflation and a shortage of skilled workers.
Inflation is high at 7.4 percent - almost twice the central bank's four percent target.
Meanwhile, direct investment in the country has collapsed, according to
Business Insider,
falling by $8.7 billion (about eight billion euros) in the first three quarters of 2023, according to the Russian Central Bank.
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The labor shortage apparently will not improve in 2024 either.
In 2022 and 2023 alone, the labor shortage in Russia has increased sharply.
As the Russian newspaper
Izvestia
reports, citing the Institute of Economics of the Russian Academy of Sciences, 4.8 million people are currently missing.
The development will probably last until 2024.
According to the study's author, Nikolai Achapkin, drivers and shop workers are particularly wanted.
Losses for Putin – Russia has to rely on help from allies, but they don't want to
Added to this are the troop losses, which according to Bootle are estimated at over 350,000 fallen and wounded Russians.
War-related emigration is unofficially estimated at over a million.
This corresponds to a total of around one percent of the Russian population.
The economic crises are leading Putin to demand more and more help from third countries and allies.
But Western sanctions have also caused unrest among them.
Putin's allies, who are considered loyal business partners, want to stop their deals.
Chinese banks want to end business with Russian customers and banks in the United Arab Emirates (UAE) are also turning their backs on Putin out of fear of sanctions.
Putin will probably never win the war against Ukraine
Despite the economic situation, Putin wants to plan record military spending for 2024.
These should make up six percent of GDP.
However, the question is how long Putin can continue to run his economy before it collapses.
Even if Russia wins the war, Putin probably won't be able to afford reconstruction.
“The expected costs of rebuilding the occupied territory are already enormous,” writes Foucart.
So it could take a long time for the Russian economy to recover - if it does.
(bohy)