Beware the Balance of War and Economy

Russia faces significant macroeconomic challenges, primarily a shortage of skilled labor and low productivity, exacerbated by heavy defense spending linked to the ongoing war. Official defense spending may suggest a manageable ratio of 6.2% of GDP, but actual figures could exceed 8%, stressing the economy further. Compounded by high inflation and interest rates that fail to stabilize the economy amid war expenditures, Russia is depleting its liquid reserves due to the inability to borrow from Western sources. The declining price of oil, influenced by external factors, poses additional threats, raising concerns about the sustainability of Russia's economic path in the medium term.