The decision of Vladimir Putin summoning 300,000 men to fight his invasion of the Ukraine, is hitting two of the weak points of the battered russian economy. The order removes active workers from the country from their jobs to send them to the front lines when the unemployment is recordcombined with the Russian exodus fleeing the country to avoid mobilization.
And it’s likely that hit the already fragile finances of the Russians, leaving the families of some recruits with no income. “The mobilization produces a strong negative impact on consumer confidence”, explained the economist at Renaissance Capital, Sofya Donets. “We will see a strategy of abandoning unnecessary purchases and a sharp drop in demand”.
The analyst predicts that fall will add about 0.5% to the contraction of Russian GDP this year. And the economy of the country governed by Vladimir Putin prepares for a deep recession: sanctions and war costs will cause inflation to rise this year. “Worse, these ramifications are likely to persist for the next five years,” said Russian economist Alexander Isakov.
the russian economy has held up better than many had predicted the extensive sanctions imposed by the United States and its allies for the invasion of Ukraine. But Putin still expects a contraction of around 3% this year, and 1% next year, with inflation well above target.
The speed of Kremlin movements in the last week has economists struggling to keep up. Locko Invest’s Dmitry Polevoy published a report this week trying to assess what the imposition of martial law, something the Kremlin has insisted is not being discussed, could mean for the economy and financial markets.
In addition to increasing the risk of a deeper recession and a greater impact on public finances, warned of possible state acquisitions of companies and the introduction of multiple exchange rates as occurs in the Argentine case.
And companies are already struggling to prevent your employees from being recruited, given the tight labor market. Government regulations allow some critical exemptions for workers, but the mechanism to obtain them is not yet fully operational since Putin hastily announced the call on September 21.
Consultants have been quick to advise employers on how to protect their staff. Still, some firms advise staff to work from home on days when recruitment papers are expected to be distributed in offices. “The authorities have begun to realize the seriousness of the situation,” said Natalya Zubarevich, an economics specialist at Moscow State University.
“It is likely that most recruits come from rural areas and engage in the agricultural and construction sectors,” he added. But high-tech companies, which had been promised that their staff would not be called up for military service, later found that many were caught up in the current wave. . Some have chartered private planes to evacuate affected personnelreported the Kommersant newspaper.
They have already left the country tens of thousands of Russians, which has caused long queues at land borders and sky-high prices for plane tickets. Amid growing fears that the Kremlin will limit outflow, officials have only said no decisions have yet been made.
The possible recruits who received mobilization notices have already been released, according to the lawyers who block exemptions But everything impacts the economy, when the government plans to step increase pressure on finances to finance war spending.
The budget requires a huge jump in revenue of income taxes for the next two years, as part of a broader push to raise revenues to help pay for the cost of the war. State-regulated utility prices are also rising.
