Russian economy ‘overheating on powder keg’- Reuters

Russia's economy, which saw a 2.1-percent drop last year, is now overheating as demand grows due to increased military spending, and businesses fail to keep up, Reuters writes.

As Putin’s regime is putting Russia on a war footing, it might seem that the Russian economy is doing well, with the GDP projected to grow by 2.2 percent this year and unemployment at a historic low of 3 percent.

However, the good news is limited to the short term, and in the medium term, the Russian economy is threatened by a series of ‘time bombs’, Reuters’ Pierre Briancon writes.

Those include the exodus of talent, or mass emigration of skilled personnel, the ailing rouble, and an increase in the inefficient and corrupt state sector of the economy.

"Russia’s prospects when military spending starts shrinking are dire. The partial circumventing of sanctions does not make up for the loss of technology transfers from Europe or the United States," Reuters writes.

"Shrinking public investment in schools and education, due to the priority given to the military, will add to the loss of productivity over the medium and long term. And in a country where life expectancy at birth is already below 70 years – compared to more than 80 years in Europe, 78 years in China and 76 years in the US – reduced investment in the health system will aggravate the country’s terrible demographics."

Indeed, the Russian economy is already showing strains and the International Monetary Fund expects GDP growth to halve to 1.1 percent next year.

"Putin may be tempted to double down and keep spending, especially because he will seek re-election in 2024… Forcing the economy to run at the current pace will, however, exacerbate its current problems and only delay the major bust that they will trigger," Reuters concludes.