Currency fall – ruble crisis: Russians are struggling with the consequences of the war

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The consequences of the conflict with Ukraine, which has lasted for a year and a half, are increasingly being felt in Russia. A weakened Russian currency, declining purchasing power, reduced exports of oil and gas and steadily rising spending on imports are some of the consequences of the crisis. Although economic data is withheld in many places, the Russian media is now openly reporting on the sometimes serious problems. Another problem is the lack of skilled labour, as many migrants leave the country due to economic hardship and sometimes the threat of conscription.

Kremlin boss Vladimir Putin, who started his invasion of Ukraine eighteen months ago on February 24, 20022 and thus caused unrest worldwide, likes to point to the still solid economy. “The current fiscal situation is essentially stable,” Putin said on Tuesday. However, he expects a deficit of 2 percent by the end of this year, as expenditure exceeds income.

Experts call for more ‘use’
Western economic experts in Moscow also believe that the country is in principle more resistant than expected to the pressure of sanctions. Numerous governments have imposed harsh sanctions on Russia in response to the war of aggression. The Russian economy is growing – mainly due to arms and ammunition production – while Germany is forecast to shrink. However, experts see no reason for the optimism that the Kremlin mainly exudes. More efforts are needed for a “strong and respected ruble” that represents Russia’s sovereignty.

Dollars and euros are missing
Other economic sectors, on the other hand, complain about a lack of orders and, above all, a lack of investment. Moreover, the now high interest rate leads to extremely expensive loans, which smothers the willingness to invest. Buying foreign currency is currently almost twice as expensive as it was a year ago, and Russia takes in significantly less foreign currency. Sales of oil and gas fell due to a Western boycott and a price cap. Dollars and euros are missing. Media close to the Kremlin criticize that the currency has become an object of speculation on the stock exchange.

Imports increase the cost of living
Surveys by the Russian central bank in August show that most Russian companies are cutting production for the second month in a row. Correspondingly, the companies also complain about a lack of skilled labor – many doing military service – and problems with the logistics of deliveries. With access to the EU largely closed due to sanctions, the country imports goods at great cost and sometimes circumvents sanctions via Turkey, Georgia, Kazakhstan and other countries. The cumbersome transport, import duties and unfavorable exchange rates against the euro and the dollar make many products more expensive and further weaken the already ailing purchasing power.

Purchasing power has been seriously weakened
Meanwhile, the main topic in the Russian media is that many people are getting less and less food for their money. According to statistics bureau Rosstat, the average income per capita has almost doubled over the past ten years to about 48,000 rubles (about 480 euros) per month. Taking inflation into account, the value of this amount today is 6.5 percent below the purchasing power of 2013.

Source: Krone

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