The Russian economy may "overheat" due to increased defense spending - British intelligence

The Russian economy may "overheat" due to increased defense spending - British intelligence

Kyiv  •  UNN

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British intelligence suggests that Russia's economy may "overheat" due to increased defense spending amid its invasion of Ukraine.

Russia's ongoing invasion of Ukraine may affect the economy of the aggressor country. As Russia increases defense spending at the expense of other areas, the risk of "overheating" of the Russian economy remains. This is stated in a new report of the UK Ministry of Defense based on intelligence, UNN reports.

Details

Analysts note that the Russian central bank has raised the interest rate by 1%, to a new benchmark rate of 16%. This is reportedly the fifth increase since July 2023.

The report indicates that inflation in Russia continued to accelerate until the end of 2023, reaching 7.5% in November, up from 6.7% in October. In general, inflation for 2023, according to the Russian Statistical Service, will be 7.4%, which is almost twice the central bank's target.

Russia's ongoing invasion of Ukraine is likely to have a negative impact on the outlook for the Russian economy. Imports have been growing faster than exports, which has likely contributed to the depreciation of the ruble since the start of the war, likely causing inflation. As Russia increases defense spending at the expense of other areas, the risk of an overheating of the Russian economy remains likely

- the report says.

Recall

The World Bank expects Ukraine's economy to grow by 3.2% in 2024, despite challenges such as the Russian invasion and high inflation.