- Russia needs to continue its war with Ukraine or risk an economic hard landing, Elina Rybakova wrote in the Financial Times.
- The country’s military industry has been a major driver of structural economic power during wartime.
- Rybakova said an end to the conflict could lead to a recession and increase pressure on the Kremlin.
Russia has experienced strong recent growth, but the country’s economic fate depends on continued militarization – which can only be achieved by continuing the war in Ukraine, think tank analysts say. wrote in the Financial Times.
According to the International Monetary Fund, Russia’s GDP is expected to grow by 3.2% this year, significantly outpacing other Western countries. But while this looks good on paper, the country is actually at risk of a hard landing if the war effort is halted, Elina Rybakova said.
“Contrary to expectations that economic constraints would hamper Russia’s ability to continue fighting, even if the invasion of Ukraine stalls, fears of economic collapse have led President Vladimir Putin and his officials to redouble their militarization. , may seek further confrontation,” Peterson said. Analysts from the Institute for International Economics said this.
Since Moscow’s 2022 invasion of Ukraine, its economic success has been largely due to military-industrial expansion and is largely supported by financial support from the Kremlin.
Direct military spending has more than tripled since the start of the war and now accounts for 6% of GDP, the senior researcher said. The figure is likely to be higher because much of government spending is not publicly known, he said.
This has brought benefits to regions that have struggled for years and are now seeing significant gains from production conversion. Rybakova said local governments are reporting a surge in employment, production facilities and businesses.
In total, military industrial facilities exploded across the country, increasing from 2,000 to 6,000 over the course of the war. In these he employs more than 3.5 million workers.
For now, he said, the war-based pivot to growth is structural, and the invasion must continue to sustain the economy.
“Reversing the structural investments made in the war will be a major challenge for decades,” Rybakova wrote. “Russia suffers from a lack of investment and regional inequality, with only a handful of regions producing primarily primary products and making a net contribution to the budget transfer system.”
Once hostilities end, it is not unlikely that a recession will occur in Russia. This only gives Moscow an incentive to continue fighting to avoid such a conflict at home.
“If authorities try to halt militarization, it could create a hard landing and add pressure to governments that already rely on repression to maintain power,” she wrote. “Internal conflicts over limited resources may also intensify.”