Thread by @kolyandr

In 2024, despite its best efforts, the Kremlin has been unable to simultaneously fight its war in Ukraine, fund social and infrastructure projects, and control inflation and the ruble. Russian economy of 2024 in graphs co-authored with @amenka for @ru_thebell -scroll down 1/10

Russia’s economy performed like a runner on steroids. But the effect of the drugs is wearing off. GDP growth is slowing; inflation is rising. Total growth this year could be as much as 4%. Next year, growth is expected to slow further until it settles at under 1.5%. 2/10

Russian businesses and lawmakers criticized the CBR, and pressure was a factor in Friday’s decision to keep the rate. This could undermine trust in the regulator. Next year, interest rates will likely be about 20%. The CBR postponed its plans to reduce CPI to 4% until 2026. 3/10

The war sucks resources. DEfence and security spending tops 8% of GDP. Def spending bleeds the civilian economy, slowing economic growth. Dampened growth and high inflation will, in turn, make inequality more visible, fuelling popular discontent. 4/10

Russia had demographic problems before 2022, and they have only gotten worse. Unemployment at 2.3% shows a lack of workers. Russia needs at least 1.6 million workers more. To attract staff, businesses up salaries which outstrip CPI and productivity 5/10

Despite double-digit interest rates, businesses continue to borrow. In the first 10 months of 2024, Russia's total corporate loan portfolio was up 16.4%, although slowing. CBR has revised its forecast upward for the growth rate of the banking sector's business loans. 6/10

Many industries operate at over 80% capacity, with only sanctions and labour shortages preventing further expansion. The only manufacturing sectors where growth remains significant are those directly linked to the military. In all other areas, growth is anaemic at best 7/10

In 2025, the EU will require all exporters to verify that the final destination for their goods will not be Russia. This and the US secondary sanctions intermediaries will likely intensify, leading to higher costs and CPI. 8/10

Western sanctions, alongside demand outstripping supply, are weakening the ruble. The authorities lack tools to tackle this: 1/2 of Russia’s reserves are frozen, and the rest might be needed to fend off threats to financial stability. Ruble volatility is the new standard 9/10

The Russian economy in 2025 will be fragile. Money is available to wage war in 2025, business generally remains optimistic. The projected 0.5% budget deficit is manageable, albeit expensive.
But the risks are growing. Stagflation is ever more visible. 10/10