The war in Ukraine has had a detrimental effect on the Russian economy, as revealed by a comprehensive assessment reported by the Financial Times.
Western sanctions and the Russian government's political response have played a significant role in impacting the country's economy. According to Rachel Lyngaas, the chief of economic sanctions at the U.S. Treasury Department, Russia has made efforts to superficially show that the war in Ukraine has not significantly affected its economy.
However, there is no doubt that the invasion is putting Russian finances under strain.
The assessment indicates that Russia's economy would have been five percent larger today if the country had not invaded Ukraine. The impact is evident through rapidly increasing expenses, the falling value of the ruble, rising inflation, and a labor market under pressure due to lost workforce.
Russia is currently spending over 100 billion dollars on defense, nearly a third of the state's total expenditures.
Furthermore, the Russian government has paused wage increases for public employees, even though inflation has reached 7.5 percent. This assessment by the Treasury Department comes shortly after the U.S. government warned that financial support for Ukraine might run out before the end of the year.
The White House and President Joe Biden have proposed sending an additional 60 billion dollars to Ukraine, but there is disagreement in Congress regarding continued support.
Last week, Russian President Vladimir Putin stated that the country's Gross Domestic Product (GDP) is expected to grow by 3.5 percent in 2023.
GDP is a measure of the size of a country's economy and is the most commonly used metric to gauge it. Increases or decreases indicate whether the economy is growing or shrinking. However, analysts assess that the growth is partly due to the military industry, which is increasingly occupying a larger portion of the economy.