Despite Russia’s claims that its economy is doing great, economic data coming out of Russia would indicate that the economy is not only overheating, but may be beginning to implode.
From: Kyiv Post by Jason Jay Smart
Russian officials claim that the national economy is flourishing, with a GDP growth rate of 4.6% in the first half of 2024. But a closer look at the numbers indicate that there might be trouble on Russia’s horizon as the ruble faces both inflation and devaluation.
Professor Steve Hanke, an economist at John Hopkins University, calculated earlier this year that real inflation in Russia is 27% – a stark contrast to the 9.1% claimed by the Russian Central Bank. Something that puts Russia’s plans, to increase 2025 military spending by 24% into perspective: It is actually less spending than in 2024 while representing a higher percent of the overall budget.
Secondary signs support Hanke’s calculation: The unemployment rate in July 2024 was 2.4%, something that is a worrying sign according to an economic model called the Phillips curve, which suggests that as the unemployment rate decreases, the inflation rate increases, and vice versa.
For a normal, healthy economy, according to MoneyChimp, a target unemployment rate should be in the range of 4-6%, with percentages lower than that indicating that inflation may be teeming under the surface of the economy.
Russia’s route to high inflation can be largely traced to Vladimir Putin, who, following the full-scale invasion of Ukraine, launched efforts to help Russia survive the massive sanctions saddled on Russia by using a Keynesian model seeking to boost aggregate demand – that is, the demand for services and goods within the Russian national economy – which provided significant, short-term relief to Russia. However, after two-and-a-half years of what amounts to printing money to stimulate the economy, Russia has created an economic bubble that may soon burst.
Voice of Ukraine 