“The root cause of the economy’s problems is labour starvation and sanctions … the symptom is an inflationary surge,” said Anton Tabakh, chief economist at the Russian ratings agency Expert RA.
Both those factors are directly related to the war.
Labour shortages, already pressing due to Russia’s demographic problems, have been exacerbated by hundreds of thousands of men joining the army, being employed by arms manufacturers or fleeing the country, as well as a tightening of migration rules.
“This is holding back GDP growth,” said economist Yevgeny Nadorshin, a former advisor to the economic development ministry.
He estimates Russia lacks around one million workers.
That has contributed to rising wages, pushing up prices set by businesses.
So too has the Kremlin’s massive increase in military spending.
State expenditure is set to be 67.5 percent higher in 2025 compared to 2021, before Russia’s military offensive.
Up against those huge sums, interest rate rises have so far had only a limited effect.
Central Bank Governor Elvira Nabiullina — who has stressed the need to stop the “disease” of inflation “becoming chronic” — has signalled she will hike rates again on Friday.
High rates have triggered outcry from bosses, including at state-run companies, with market borrowing costs running at 25-30 percent.
“The economy can’t survive like this for long,” German Gref, CEO of Russia’s largest lender, state-run Sberbank, said this month.
Russian Railways said it will cut investment by 40 percent next year.
Even Putin’s closest allies have complained.
Sergei Chemezov, head of the Rostec military-industrial conglomerate and a close friend of the president, described interest rates of more than 20 percent as “madness”.
Analysts expect many firms, unable to refinance, will go under.
“The number of bankruptcies is about to rise sharply, especially among small and medium businesses. But there will be some among large businesses as well,” said Nadorshin.
Growth slowdown