Espreso. Global

Budget holes, weakening ruble: is Russia’s economy on the brink?

29 November, 2024 Friday
16:40

Russia's economy faces mounting challenges, including a weakening ruble, falling corporate profits, and declining investments, all exacerbated by war-related expenses and systemic instability

client/title.list_title

The author of the Resurgam Telegram channel discussed the issue.

The Russian Ministry of Finance has reported an unexpected budget deficit, signaling deeper economic troubles.

Currency intervention and ruble stability  

The Central Bank of Russia (CBR) is intervening in the currency market, using yuan reserves to stabilize the ruble. While recent efforts improved the exchange rate from 15.5 to 14.88, it remains significantly weaker than earlier levels of 13.2 in October or 12.6 in September. Current tax payments offer short-term support, but long-term ruble stability depends on the CBR’s reserves and capacity to manage market pressures. If the ruble weakens further after this temporary relief, it will indicate dwindling reserves and limited options.

The ruble’s value reflects broader economic challenges, akin to symptoms revealing a patient’s overall health. A full diagnosis requires assessing multiple factors.

Falling corporate profits  

According to Rosstat, corporate profits in the first nine months of 2024 dropped 19.1% compared to the same period in 2023. Despite nominal GDP growth, declining profits undermine investments, banking activity, and consumer spending, signaling economic fragility. 

This trend also affects government revenue. The Finance Ministry reported a 7% shortfall (357 billion rubles) in income tax collection due to falling corporate earnings. Finance Minister Anton Siluanov admitted the shortfall was unforeseen and warned of additional budgetary gaps.

Declining profitability and economic overheating  

A study by a pro-government think tank, CMAKP, revealed that profitability across major industries has fallen below the yield on federal bonds, making investments in business expansion less attractive than holding securities. This dynamic stifles economic growth and increases the risk of stagflation—a condition of stagnant growth paired with inflation.

Risks and scenarios  

The economy faces critical risks, comparable to overloading a system beyond its capacity. Current policies, like raising interest rates, are short-term fixes that fail to address underlying issues. Persistent instability and reduced business confidence suggest that efforts to manage overheating are faltering.

Potential outcomes include:  

  • Controlled stabilization: Unlikely while war expenses persist, as they continuously add strain.  
  • Stagflation: The most probable scenario, marked by prolonged economic weakness and reduced productivity.  
  • Systemic collapse: A more severe possibility if compounded by external shocks or unresolved structural problems.

In summary, Russia's economy shows signs of strain across multiple indicators—currency instability, falling profits, and reduced business investment—pointing to deeper, systemic challenges.

Tags:
Read also:
  • News
2025, Sunday
12 January
19:48
OPINION
Boris Johnson's misguided view on Russia: Blind spot in Western politics
19:32
Interview
From Putin's point of view, Trump's statements are imperialistic aspirations - U.S. diplomat
19:11
German election forecast: impact on Ukraine
18:52
Russia claims "controlled burn" as fire rages at Engels oil depot after Ukrainian drone strike
18:26
Ukraine reports 75 clashes at front, repels 22 attacks in Pokrovsk sector
18:03
Exclusive
Russian forces outflank Pokrovsk to cut logistics, avoiding urban combat - military expert
17:45
NATO, Ramstein decisions on Ukraine air defense remain unfulfilled – Zelenskyy
17:20
Ukraine's Usyk awarded best boxer of year by The Ring
16:55
Unable to enter port, fuel tanks leak: Ukrainian intelligence on Russia's struggles to evacuate military gear from Syria
16:44
Updated
Russian army targets Kherson, its outskirts, injuring civilians, damaging critical infrastructure
16:31
Paperwork delays Lithuanian drone deliveries to Ukraine
16:10
Elderly man injured in Russian drone attack on Ukraine’s Mykolaiv region
16:00
Russian bus crashes in Ilovaisk, killing passengers
15:44
Ukrainian forces scale up experiment with new method to down Russian Mavics - Defense Express
15:25
Ukraine strikes Russian command post in occupied Donetsk region
15:04
Poland rules out boots on the ground in Ukraine
14:59
Zelenskyy calls on Western allies to honor promises on weapons supplies to Ukraine
14:33
Exclusive
“Army is running out of people”: Authorities need to hold honest conversations with the Ukrainian people – official
14:02
OPINION
Success on his opponent's turf: Another take on Zelenskyy's interview with Fridman
13:33
OPINION
Serbia's "knife in back" of Russia
13:00
Russian airstrike on senior care house in Kursk region leaves woman dead
12:15
Partisans identify secret Russian nuclear unit in Far East
11:29
Ukraine destroys 60 of 94 Russian drones overnight
11:02
Russian stormtroopers attack Ukrainian positions in Lyman sector
10:55
Switzerland proposes hosting Putin-Trump meeting
10:29
1,750 Russian soldiers eliminated in Ukraine in single day
2025, Saturday
11 January
19:40
Exclusive
Russian opposition expert Morozov outlines three key aspects of Putin's potential communications with Washington
19:00
Exclusive
U.S. military support for Ukraine will continue, says diplomat Bryza
18:35
Exclusive
Russia's shadow tanker fleet hit: Economist Pendzin on new sanctions package
18:10
Biden administration extends special status for Ukrainian refugees by 1.5 years
17:48
"Our task is to make 2025 a record year for drone production" – Zelenskyy
17:22
Exclusive
Trump unconcerned with terms of Ukraine-Russia peace deal – diplomat Bryza
16:55
Exclusive
"Without people, strength, and resources, we can't hold Kurakhove" – Major Hetman
16:31
Ukrainian army's retreat from Kursk will trigger Russian offensive
16:05
Exclusive
No Trump-Putin meeting in 2025, Russian opposition expert Morozov says
15:40
OPINION
Meeting with Trump. Putin wants to show he is being talked to
15:14
Two North Korean soldiers captured in Kursk region brought to Kyiv
14:50
Exclusive
First underground school built in Sumy region: costs revealed
14:23
Exclusive
Kurakhove issue remains unresolved: serviceman on Russian attacks in this sector
13:58
Exclusive
Preparing launching pad: political scientist Reiterovych on Trump's geopolitical statements
More news