Russia’s Economy Set to Slow, Says Bank of Finland

The Bank of Finland has predicted that Russia's economic growth will slow from last year's four percent to about two percent this year and then further decline to around one percent.

However, Russia's economy is not currently undergoing a crisis, but there are extremely high risks associated with its development as long as the country continues its war of aggression against Ukraine.

Russia's economic growth has been based on pumping money into the market—that is, increasing government spending and expanding military-industrial production. However, this approach is reaching its limits, as labor shortages are emerging, prices are rising rapidly, and sanctions are hampering Russia's foreign trade. Additionally, the country's production capacity is nearing full utilization, making further expansion difficult.

Russia's public finances are also in deficit, and inflation has accelerated to the point where consumer prices had already risen by ten percent at the beginning of this year compared to the previous year. However, it remains to be seen how the Russian people—who have historically been accustomed to hardship—will react to this.

From the perspective of world peace, it would of course be beneficial if they became frustrated with their government and ultimately brought it down. However, Vladimir Putin is a dictator who does not shy away from violence, making this scenario unfortunately unlikely.

Previous thoughts on the same topic:
The Price of Xi´s and Putin's Game Is Paid by Ordinary Russians
Europe Needs More Money—and More Will—to Defend Itself
Russia to Triple Its Military Presence on Finland’s Border

Western Nations Should Act Decisively On Two Fronts Against Russia

The CEO of Russia's largest bank, Sberbank, stated that the country's economic outlook is weak. According to him, "we see significant signs of an economic slowdown."

The reason for Russia's economic woes is Vladimir Putin's war of aggression in Ukraine, which has resulted in enormous amounts of money being spent on military expenses. Additionally, foreign trade has become significantly more difficult due to sanctions imposed by Western countries.

According to the CEO, the weakening of Russia's economy is particularly evident in the construction sector. Inflation is also at a high level, leading the country’s central bank to raise the interest rate to as much as 21%.

Moreover, it is expected to continue raising interest rates later this year. However, the Sberbank CEO emphasized the need for caution in these adjustments to allow for the possibility of boosting economic growth.

It remains to be seen, however, whether—and at what point—Russia's economic troubles will hinder Putin's war efforts in Ukraine. Therefore, it is crucial for Western nations to act decisively on two fronts in this situation.

The first is to more resolutely support Ukraine's military efforts, and the second is to accelerate measures that contribute to Russia's economic decline. Hopefully, this approach is understood by the leaders of the world's largest economies—namely the USA, Germany, the UK, and France.

This is particularly important right now, as Russia's own economic developments are providing an opportunity to significantly impact its war-making capabilities. This, in turn, could pave the way for peace, not only for Ukrainians but also for the hundreds of thousands of Russians who have lost family members to the war's grinding machinery.

Previous thoughts on the same topic:
It Is Time for Vladimir Putin to Acknowledge the Facts and Do Dmitry Medvedev a Favor
Will Trump Push Ukraine Toward Peace by Breaking U.S. Promise?
From Finland to Olaf Scholz: The Imperative of Supporting Ukraine's Independence instead of its Finlandization

Highlights of the BRICS Meeting in Kazan, Russia

BRICS is an intergovernmental organization comprising Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia, and the United Arab Emirates. It is a geopolitical bloc, with governments meeting annually at formal summits to coordinate multilateral policies.

This year's meeting in Kazan, Russia, has brought up some interesting developments, which I would like to present to you, my esteemed reader.

The Portuguese UN Secretary-General, António Guterres, attended a summit hosted by Vladimir Putin, a man who did not participate in the previous BRICS meeting to avoid being arrested under an international arrest warrant. I wonder whether the UN Secretary-General is unaware of the political implications of this or if he knowingly chooses to support the Russian dictator.

In any case, I do not believe his visit enhances the respect for the UN among people in Western countries. However, I am certain his popularity will rise in some other parts of the world.

President Vladimir Putin presented a symbolic BRICS currency proposal. However, the head of Russia's Central Bank, Elvira Nabiullina, was not in favor of the idea.

I can’t help but wonder how long it will take before Nabiullina's body is found under a window somewhere in Russia. That seems to be the fate of Russians who disagree with Mr. Putin.

Venezuelan dictator Nicolás Maduro declared that “Venezuela is part of this BRICS family. We apply the principles of BRICS with historical conviction. The time has come for a balanced world, which is multipolar and multicentric. BRICS can count on Venezuela and on the full revolutionary strength of our historical project.”

Given the collapse of the Venezuelan currency - the Bolivar - it is clear that anything would be an improvement in terms of stability. On the other hand, Venezuela's inclusion could have a highly negative effect on any new currency. It will be interesting to see if, for example, China would be willing to join a currency shared with Venezuela.

Finally, it is worth noting a prime example of a kind of transparent dishonesty heard at the meeting. It was said by Putin, who, without batting an eye and without acknowledging his own guilt, rambled on that "unfortunately, there are many armed conflicts on our planet, including at Russia's borders. It is truly unfortunate that there is this armed conflict in Ukraine."

Previous thoughts on the same topic:
Resisting Putin’s Foolish Dreams
Does China prove the superiority of market economy?
Lessons from Venezuela