The increase in wages and production, which was the first consequence of the invasion of Ukraine, gradually expires. The expert warns that Russia falls into stagflation. Cooling the overheated economy along with advanced inflation leads to an highly dangerous combination for Putin.
According to the expert, the second and 3rd quarters of this year will see economical growth slowed down and the crisis of consumer demand. The forecast for the second half of the year should light all informing lights on the Kremlin.
"New worrying signs have emerged"
Belousov describes how the current situation arose. As the expert points out, economical activity is falling rapidly, the impact on the budget is decreasing, the anticipation of "low-cost" replacement of imports is exhausted, and the economy is subject to advanced interest rates and income taxation increases.
The Russian economy faced a combination of tough fiscal and monetary policies. As Belousov points out, last time (2012-2013) this led Russia to a crisis and a stagnation of the economy. any experts point out that discontent in society was so large at the time that Putin decided to annex Crimea to warm his image.
The increase in Gross home Product (GDP) in Russia in the first 4th slowed to 1.4% annually. Inflation slows down, but it's inactive high. It is 9.7 percent annually.
In April, according to the estimates of the Russian central bank, the increase in prices after seasonal factors was 6.2% annually, compared with 7% in March and 8.2% on average in the first quarter.
According to Belousov, investments in Russia have long been stagnant, but now there are fresh worrying signs for the Kremlin. Among them, it mentions "growing problems in construction".
Production volume is almost unchangeable for now, but the number of projects started is decreasing — construction companies are "redirecting" resources to projects that are being completed. Most important, however, continues Belousov, this is the coming collapse of consumer request — especially for non-food goods.
The most hard situation, as the economist notes, is in the passenger car marketplace and in the household appliances market. According to CMAPP estimates, real consumer expenditure of the population, excluding seasonality, has remained stagnant since mid-2024 and retail trade in non-food commodities has declined this year.
For the indirect confirmation of "the increasing problems of the sales crisis" Belousov considers the price decrease of a wide scope of non-food commodities (technically complex goods, any types of galanteric articles, clothing and footwear, etc.). He sees “an crucial hazard that Trade in the coming years will become a fresh sphere of crisis‘.
"Calendar of possible crisis"
According to Belousov, after the start of a full-scale invasion of Ukraine, the Russian economy was driven mainly by budgetary spending on war, the arms manufacture and infrastructure modernisation, but present this origin has become much weaker.
"The economical growth constraints resulting from fiscal stableness have emerged and intensified rapidly," he states. According to the expert, the budget is 1 of the main sources of uncertainty in the Russian economy.
Vladislav Zolotov / Getty ImagesBuilding of the Russian Ministry of Finance in Moscow (picture)
In specified a situation, investment needs to be increased for economical growth, but as Belousov points out, the current conditions only hinder this.
The main origin of investment is the company's own resources, their profits, but since that year the taxation on them has increased from 20% to 25%.
According to the bank investor Evgeny Kogan, the tough policy of the Russian central bank could provoke a crisis. According to him, advanced interest rates and costly loans can lead to a decline in investment, consumption and all GDP.
The crisis may besides give emergence to "external shock" (e.g. further sanctions or Further decline in oil prices in global markets). Then the exports will decrease and the ruble will lose value.
In specified a situation, the Central Bank will not be able to lower interest rates, which could negatively affect banks.
On the basis of his forecasts, Belousov has drawn up a "calendar of possible crisis", which is the timetable for the collapse of successive sectors of the economy in the close future.
"Inflation is likely to increase in the second half of the year"
According to the expert, the second and 3rd quarters of this year will see economical growth slowed down and the crisis of consumer demand. Wages emergence to an end. More and more companies are incapable to rise wages at the current pace. This means that the income of the population, which has been the main driver of growth in the last 2 years, will not increase at the current pace.
With the another factors, this will further strengthen the ruble weakness and inflation. The central bank is likely to respond with an increase in the basic interest rate "with appropriate consequences for late payment and money issuance". This in turn will drive a further cycle of adverse factors to the Russian economy.
