After the recent parliamentary elections, Vladimir Putin seems to have more power, and his party, United Russia, now holds 349 out of 450 seats in the Duma, marking the largest majority in the party's history. However, amid this political success, Russia's economic situation is extremely worrying.
Economic Growth and Investment Situation
Forecasts indicate that Russia's economic growth will reach 0.6 percent this year, while investments are declining. The interest rate has also remained at 14 percent. Additionally, the government budget deficit reached 5.8 trillion rubles by the end of August, and oil and gas revenues have decreased by 16.7 percent.
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More than half of the senior executives of Russian businesses surveyed by RBC expect economic conditions to worsen by the end of the year. According to Andrey Kostin, head of VTB Bank, the seizure of about 7.6 trillion rubles in assets by the government since 2022 has instilled fear in Russian businesses regarding investment.
Increased Military Spending and Pressure on the Economy
Military spending is set to increase by 27 percent next year, reaching 17.1 trillion rubles, which will be funded through tax increases, more borrowing, and cuts in other expenditures. At the same time, Moscow has restricted access to data on the production, refining, and transportation of Russian oil, making it more difficult to assess the damage caused by Ukraine's attacks on Russia's energy system.
However, unemployment remains at a very low level, and real wages are rising. High oil prices could add up to 1 trillion rubles to the cash reserves of the National Wealth Fund this year. It seems that Moscow has the financial resources necessary to continue the war, and the new budget reflects a willingness to persist on this path.
Although economic pressure on Russia has significantly increased, there are still no signs of a decrease in Moscow's willingness to continue the war. Forecasts suggest that the Russian economy will grow by only 0.5 percent this year, and corporate profits have decreased by 13.3 percent in the first half of the year.
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