Russian Roulette Two Former Central Bankers on Russia's Inflation Problem
Oct 4, 2024
Alexandra Prokopenko, a former central banker and fellow at the Carnegie Russia Eurasia Center, joins economist Sergey Aleksashenko to dissect Russia's inflation crisis. They delve into the ramifications of excessive government spending—particularly on military endeavors—and its impact on the overall economy. The pair discuss the sustainability of the 2025 military budget, the strain on public sector funding caused by rising military expenditure, and the vulnerabilities linked to fluctuating oil prices. Their insights illuminate the challenges Russia faces amidst ongoing conflict and economic instability.
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Non-Monetary Inflation
- Russia's inflation is non-monetary, driven by government spending and increased wages.
- This fuels economic growth but is unsustainable, resembling overheating.
Kurgan Region Example
- The Kurgan region, home to a military vehicle factory, saw wages rise 30% since the war began.
- This demonstrates how budget expenses directed towards the military impact the broader economy.
Inflation Underestimation
- Sergei Aleksashenko suspects that Rostat, Russia's statistical agency, underestimates actual consumer inflation.
- He points to inconsistencies between reported household income growth and domestic production figures.