Russia’s economy is starting to drain – Bloomberg

Growing restrictions on key sectors of the Russian economy threaten its rapid cooling. The Bloomberg news agency reports this with reference to data from the Russian Ministry of Economy, the Central Bank, and the Federal Statistics Service.

The media said Russia’s overheated economy was on the verge of cooling down. Labor resources and production capacity are almost exhausted, and the construction and banking sectors, after the elimination of preferential mortgages, are no longer protected from the impact of very high interest rates.

In particular, economic activity in June showed signs of cooling in most sectors, and the pace of construction growth during this period was the lowest since 2020, the material notes.

Although Russia’s GDP will jump more than 4% year-on-year in the second quarter of 2024, growth will slow to half that level by the end of the year and fall to 0.5% to 1.5% in the next year.

The Russian government has massively increased spending on the military and defense industries and, in an attempt to soften the impact of the sanctions, on businesses, causing the economy to heat up to levels not seen since global financial crisis in 2008.

Businesses in Russia currently lack more than two million workers. The unemployment rate, an important sign of an overheating economy, fell to a historic low in Russia at 2.4%, lower than in any G7 country.

“Civilian” industries are unlikely to catch up to the military sector as more consumers face the reality of borrowing at rates of 20% or higher.

However, the media said that capital investment in Russia remains high, which in the long term may affect the limits of economic growth.