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The Russian economy cannot win or lose the war in Ukraine, one economist says.
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It is because Russia cannot afford the cost of rebuilding and protecting Ukraine.
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The cost of repairing its land is already “enormous,” Renaud Foucart says.
Russia’s economy has been completely controlled by its war in Ukraine, so Moscow cannot win or lose a war, according to one European economist.
Renaud Foucart, senior lecturer in economics at Lancaster University, pointed to the economic situation facing Russia as the war in Ukraine enters its second year.
Russia’s GDP increased 5.5% year-over-year over the third quarter of 2023, according to data from the Russian government. But much of this growth is being fueled by military spending, Foucart said, with plans for the Kremlin to spend a record 36.6 trillion rubles, or $386 billion, on defense this year.
“The payment of the army, weapons, tanks, aircraft, and the payment of dead and wounded soldiers, all contribute to the total GDP. Simply put, the war against Ukraine is now the main driver of the growth of the Russian economy “Foucart said in an op-ed for. Discussion this week.
Some areas of the Russian economy are suffering as the war continues. Moscow is hit by a severe labor shortage, due to young workers fleeing the country or being drawn into the war. The country is currently short 5 million workers, according to one estimate, which is causing wages to rise.
Inflation rose by 7.4% – almost double the central bank’s 4% rate. Meanwhile, direct investment in the country has fallen, falling by $8.7 billion in the first three quarters of 2023, according to data from Russia’s central bank.
All of that puts the Kremlin in a difficult position, regardless of the outcome of the war in Ukraine. Even if Russia wins, the country will not be able to rebuild and save Ukraine, due to the financial cost and the consequences of remaining isolated from the rest of the world market.
Western countries have refused to trade with Russia since it entered Ukraine in 2022, which economists say could seriously affect Russia’s economic growth.
As long as it remains isolated, Russia’s “best hope” is to be “totally dependent” on China, one of its few remaining allies, Foucart said.
Meanwhile, the costs of rebuilding his country are already “enormous,” he added, pointing to problems such as broken buildings and social unrest in Russia.