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Russia’s economy is nearing burnout as the country diverts a significant portion of its financial resources to the conflict in Ukraine, which has now lasted over two years.
A recent analysis from the Institute for the Study of War comes shortly after the Russian central bank raised interest rates by two points to 21%—a historic high for the country.
In an update, the American NGO explained that with these mounting economic issues, Vladimir Putin may soon be unable to continue funding the war.
“The main problem is that this will further weigh on private-sector investments, which have already started weakening, because the borrowing costs are now reportedly exceeding the profitability in many sectors,” Vasily Astrov, senior economist at the Vienna Institute for International Economic Studies, said to Newsweek.
“I am not convinced about this argument—and I am not sure that it is a very wise strategy for the central bank to fight inflation at all costs, especially since the latter has been increasingly driven by supply-side factors,” he added.
Since the imposition of sanctions by the European Union and other Western nations, Russia’s economy has taken a serious hit, particularly in its oil and gas sales, which constitute a large share of national revenue.
Despite the International Monetary Fund’s forecast of a 3.6% growth for Russia’s economy this year, it is expected to slow significantly next year.
