Inflation in Russia is notably fueled by the explosion in military spending for the assault in Ukraine, the effects of sanctions and the rise in wages caused by the labor shortage.
Vladimir Putin in Moscow, Russia, December 19, 2024. (AFP / ALEXANDER NEMENOV)
A peak at 8.9% in November: galloping inflation in Russia is a “worrying signal” recognized Thursday, December 19, Russian President Vladimir Putin, who nevertheless insisted on praising the “stable” economic situation of the country.
“Inflation is a worrying signal,” admitted the Russian president in the first minutes of his major annual press conference, while
the authorities are officially targeting a 4% price increase
. “What is unpleasant and bad is the rise in prices. But I hope that if the macroeconomic indicators are maintained, we can cope with it,” he added.
Inflation in Russia is notably fueled by the explosion in military spending for the assault in Ukraine, the effects of sanctions and rising wages, a direct consequence of labor shortages on the job market, companies being obliged to offer attractive remuneration to recruit.
This rare admission from Vladimir Putin comes on the eve of a highly anticipated meeting of the Central Bank of Russia (CBR) which could
raise its key rate, already at a record level in 20 years of 21%
. Analysts expect the key rate to rise by one or two percentage points on Friday.
Shortness of breath
This possibility has already provoked an outcry from major Russian bosses, some denouncing a “madness” which limits investments and, according to them, slows down the national economy.
“The situation of the economy as a whole in Russia is stable,
despite external threats and attempts at influence
“, however, tried to convince Vladimir Putin in front of journalists in this television show watched by millions of Russians.
The Russian economy, after having resisted Western sanctions for the last three years, has been showing signs of running out of steam for several weeks, with stubborn inflation eroding purchasing power, but also a surge in interest rates which is handicapping businesses, the falling ruble and a gloomy outlook for 2025.
The Russian currency is at its lowest against the dollar and the euro
since March 2022, the greenback currently trading for more than 100 rubles.
Vladimir Putin said he expected an increase in GDP at the end of the year of “3.9%, perhaps 4%”, but the BCR anticipates a sharp deceleration next year, with growth expected in 2025 between 0.5 and 1.5%.
