Putin's war machine facing significant funding squeeze as they are in a recession - London Business News | Londonlovesbusiness.com

"Russia is likely experiencing a recession, with a national economy 1.5% smaller today than it was in February 2022, finds a new report from LSE IDEAS, London School of Economics and Political Science. The paper, produced in collaboration with Ukrainian Industry Expertise for the PeaceRep programme, will be published on 2nd December and offers a comprehensive survey of the Russian economy's current health."

"While conventional wisdom sees Russia as holding the stronger position as talks aimed at ending the war progress, these findings show that Russia lacks sources of government deficit financing that are non-inflationary, and its economy is facing steep inflationary pressures. The authors estimate that inflation is likely running at approximately double official estimates over the course of the full-scale invasion, leading to a significant downgrade in reported GDP growth."

"Russia has run down reserves in its sovereign wealth fund to finance the war, and the latest oil sanctions significantly impact the economy's capacity to generate external revenues. The war has also driven a wedge in living standards, dramatically improving incomes for 20% of Russians at the expense of the large majority. The authors argue that Russia should not be treated as a "metaphysical entity" that is uniquely capable of overcoming the hardnosed realities of its economic position, no matter the circumstances."

Russia's national economy is about 1.5% smaller today than in February 2022 and is likely experiencing a recession. The economy lacks non-inflationary sources of government deficit financing and faces steep inflationary pressures, with actual inflation likely about double official estimates, implying reported GDP should be downgraded. Sovereign wealth fund reserves have been drawn down to finance the war, and recent oil sanctions reduce capacity to generate external revenues. Living standards diverged sharply: roughly 20% saw improved incomes while the large majority suffered declines. Military Keynesianism appears constrained by these fiscal and external limits.

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