Russian economy falters as inflation and interest rates soar
The Russian economy is beginning to falter, with inflation exceeding 9 per cent. The central bank has raised the main interest rate to 21 per cent, and bank loan interest rates are approaching 30 per cent. The rouble exchange rate has fallen to levels seen in the early months of the war, reports the French daily "Le Monde".
Signs of a rapid deterioration in the economic situation in Russia are multiplying, according to the heads of Russian companies, even those particularly close to the Kremlin, the Parisian daily reports. The International Monetary Fund (IMF) forecasts Russia’s economic growth will slow to 1.3 per cent of GDP by 2025.
- The central bank rate is 2.5 times higher than inflation, and it still isn't declining. It seems the remedy is more harmful than the ailment - assessed Alexey Mordashov, head of the mining and metallurgical company Severstal.
Sberbank's head, German Graf, highlighted the challenges facing the economy, warning that it may not endure for much longer as evident signs of a slowdown emerge.
Sergei Chemezov, who leads Rostec, a central figure in the industrial-military sector according to Le Monde, expressed concern that rising interest rates are significantly hindering growth in the industrial sector. He warned that maintaining this approach could lead to the collapse of most enterprises.
An anonymous member of the Russian business community shared with Le Monde that the economic situation is precarious, with warnings being directed at the Kremlin that, while the economy is currently stable, it cannot sustain itself for much longer. They emphasized the urgency of resolving the conflict in Ukraine swiftly.
However, if a truce were to occur, the political elite would understand that this is a solution far from the Kremlin's initial goal, and for the regime, it could mean problems. The facade is fragile! We saw this during Yevgeny Prigozhin's rebellion," continues the newspaper's interlocutor.
Will Donald Trump visit Moscow?
U.S. President-elect Donald Trump has allowed reports to surface in the media that he will quickly travel to Moscow to sign an agreement that would effectively force Kyiv into territorial concessions but would freeze the conflict. The Kremlin has not responded with any indication that it is interested in a truce, "Le Monde" reminds.
A European diplomat in Moscow tells the newspaper that, for now, Vladimir Putin "is sticking to his fundamental principles" and makes it clear that peace will only be achieved on his terms.
In the weeks ahead, Putin will monitor Trump closely to assess the state of American military support for Ukraine. Meanwhile, he confronts significant challenges within Russia, including sanctions and their growingly concerning consequences on the economy, as noted by the diplomat.
Thierry de Montbrial, president of the World Policy Conference, forecasts that the Russian leader will observe Trump over several months. It would be in the Kremlin’s interest to avoid mobilisation and economic collapse, but "Putin is not in a hurry."
Yevgeny Prigozhin, head of the Wagner Group, a mercenary formation, died on 23rd August in a plane crash under unexplained circumstances. Still, it is believed that this crash was Putin's revenge for Prigozhin's and the Wagner Group's rebellion in June.
On 24th June, Wagner forces took over the headquarters of the Russian army in Rostov-on-Don and then began moving towards Moscow. Prigozhin demanded the "restoration of justice" in the army and the removal of Defence Minister Sergey Shoygu. However, that same evening, he announced a retreat and the withdrawal of mercenaries to field camps to "avoid bloodshed."
