It sounds the alarm for Russia’s economy: why can it collapse at any moment?
Since Moscow’s invasion of Ukraine in February 2022, it has been repeatedly debated whether the Russian economy has been adequately affected by the sanctions imposed by the global communityor if he had still found a way not to sink.
Western nations have been the toughest with sanctions, particularly targeting Russian trade and energy activities. Despite this, the increase in war activities caused the economy to grow by 3.6% last year.
However, the data could be misleading. Herman Gref, head of one of Russia’s largest banks, Sberbank, warned of a imminent collapse. “Our economy is definitely and severely overheated”, said the bank manager. And this is a really bad signal for Moscow.
Economic meltdown coming to Russia?
Herman Gref, CEO of Sberbank – the largest Russian bank by asset value – said that the country’s economy is overheated and this sounds like an alarm.
Gref pointed out that production capacity is at a historically high level, at 84%. He added that it simply is “impossible” overcome this production capacity threshold and produce even more.
Reports from Russia suggest that the country’s economy is primarily driven by war activities that generate demand for military goods and services and by subsidies that stabilize the economy.
Rosy GDP figures alone are not a good measure of economic performance, as weapons and ammunition do not improve the quality of life of Russians or contribute to future economic growth, Sergei Guriev, former chief economist of the European Economic Bank, suggested in January. reconstruction and development.
Not only. There is a significant one labor shortage in Russia. It already existed before the invasion and was further strengthened, as highlighted by Flemming Splidsboel senior researcher at the Danish Institute for International Studies, Diis.
“Many Russians fled the country to avoid participating in the war, and many of those recruited had to pay a high price. There is talk of 400,000-500,000 Russian soldiers killed or disabled, to which must be added those who are active in the war or who have left the country.”explained Flemming Splidsboel.
Already at the end of last year, the head of the Russian central bank, Elvira Nabiullina, had warned against the scenario that now seems to be coming true.
“Imagine the economy as a car. If you drive faster than the car’s specifications allow, sooner or later the engine will overheat and we will not be able to travel longer distances. Maybe we will run fast, but for a short time”Elvira Nabiullina warned in a press conference on 23 December.
In this context, the strict policy pursued by the Russian Central Bank is rational, Herman Gref said.
“A high reference rate of course, economic development always slows down. What is the Central Bank currently doing? It’s holding back economic development, because the economy has obviously overheated. Although it is unpleasant, it is rational. There is no other way. We know when rates weren’t raised for political reasons and then how that ended. An example is Turkey”Gref emphasized.
The Russian war machine, therefore, is only apparently keeping the nation’s GDP afloat. A collapse could be imminent, according to analyses.
