Russia’s war economy is running hot
One significant sign of the West’s loss of significance — or just a sign of the power of military Keynesianism — has been the Russian’s economy’s failure to conform to the initial expectations of its sanctioners. “We will cause the collapse of the Russian economy,” said French Finance Minister Bruno Le Maire:
In 2024 defence spending will almost double, to 6% of GDP — its highest since the collapse of the Soviet Union. Mindful of a forthcoming election, the government is also boosting welfare payments. Some families of soldiers killed in action are receiving payouts equivalent to three decades of average pay. Figures from Russia’s finance ministry suggest that fiscal stimulus this year is worth about 5% of GDP, a bigger boost than that implemented during the Covid-19 pandemic.
Russia’s worries, then, are different from the predicted recession: they are that as inflationary pressures, caused in part by resource price shocks associated with the war in Ukraine, now ease elsewhere, that is showing less sign of happening in Russia amid stimulus.
Source: The Economist