Russian officials are warning Putin that a financial crisis could arrive this summer, report says, while his war on Ukraine becomes too big to fail | Fortune

"They pointed to weak oil revenue, which crashed by 50% in January from a year earlier, and a budget deficit that continues to widen, even after Putin hiked taxes on consumers. A Moscow business executive also told the Post that the crisis could arrive in "three or four months" amid spiraling inflation, adding that restaurants have been closing and thousands of workers are getting laid off."

"The economic strains go back to Russia's invasion of Ukraine four years ago. As sanctions took hold and Putin mobilized the economy for a prolonged war, a tight labor market and high inflation forced the central bank to keep interest rates high. Recent easing has failed to prevent spending declines in several consumer categories. With companies feeling the squeeze of high rates and weaker consumption, more workers not being paid, getting furloughed, or seeing their hours cut."

Oil revenue plunged 50% in January year-over-year, sharply reducing a core source of Kremlin income. Budget deficits continue to widen despite tax increases on consumers. High inflation and a tight labor market led the central bank to keep interest rates elevated, and recent easing has not stopped declines in consumer spending. Businesses face weaker demand and high borrowing costs, prompting layoffs, furloughs, unpaid wages, and restaurant closures. Consumers are struggling to service loans, increasing the likelihood of banking or nonpayments crises. Warnings of widespread corporate pre-default conditions underscore growing systemic financial risk.

Read at Fortune