The Tipping Point of the Russian Economy

The Russian economy is facing a critical juncture, marked by soaring interest rates that have recently reached an unprecedented 21%. While historically, wartime economies can benefit from increased government spending on defense, the current economic situation in Russia suggests underlying troubles ahead. Despite experiencing some growth since the invasion of Ukraine, which saw a 3.6% increase last year, the sustainability of this growth is being challenged by high inflation and a depreciating ruble. Analysts warn that the government's heavy defense spending, which constitutes about 8% of GDP, is becoming increasingly difficult to finance amid mounting economic pressure.