Russia is facing a mounting risk of stagflation, a phenomenon where high inflation coexists with economic stagnation or recession, according to a Kremlin-backed think tank. TsMAKP warned that the country’s high interest rates would trigger an economic downturn, despite continued inflation.
The tight monetary policy has cost businesses profitability and risks sparking bankruptcies. With inflation running hot, Russia is heading towards its worst-case economic scenario. The central bank’s actions have created stagflation, a simultaneous threat of stagnation and high inflation, which is feared by central banks worldwide.
To combat rising prices, the Russian central bank has raised interest rates to a record 21%, but these measures have shown limited impact on inflation, with annual inflation slowing from 8.63% in September to 8.54% in October. Food prices continue to soar, including staples like potatoes, which rose 64% this year.
Business leaders, such as Rostec’s CEO Sergei Chemezov, are warning that high interest rates are eroding profitability and triggering nationwide bankruptcies. The central bank is now operating under the shadow of stagflation, with forecasts predicting further economic downturns and a possible interest rate hike to 22% next month.
Source: https://www.businessinsider.com/russia-economy-outlook-stagflation-recession-inflation-gdp-growth-ukraine-war-2024-11