“Cracks have started to emerge” in the Russian economy as Putin’s labour force begins to run dry, it has been warned.
In October, interest rates were raised to to a 21-year high of 21% to curb rampant inflation – despite the misgivings of Putin’s oligarchs.
Sergei Chemezov, boss of the Rostec, the state-run defence conglomerate, warned that the decision taken by the Russian central bank boss Elvira Nabiullina would be a “serious brake on further industrial growth” and could cause “stagflation”.
Richard Connolly, associate fellow at the defence think tank the Royal United Services Institute (Rusi), told the Telegraph Nabiullina “has done a lot of things that have caused a lot of other allies of Putin to squeal”.
However, the protestations of the oligarchs are being ignored by the Kremlin, the expert said. Putin has “invested a lot of his own political capital in supporting” Nabiullina, according to Connolly.
He added that the inflationary pressures in the Russian economy mean that Putin cannot ignore her willingness to increase interest rates.
As of October 2024, the country’s inflation rate is 8.5 %.
Now the country is becoming hamstrung by labour shortages. Nabiullina said in October that “spare hands no longer exist in the economy”.
William Jackson, at Capital Economics told the Telegraph: “The cracks have started to emerge”.
She warned that Russian parliament in October that “demand has significantly outpaced the economy’s production capacity”.
“In some sectors, there is almost no idle equipment left, not even outdated machinery,” she added.
