One of the weakest points in the survivability of President Vladimir Putin’s regime is the Russian economy. On April 24, Putin assured Russian business leaders that the country’s economic challenges are part of a planned “soft-landing” to curb inflation. The Consumer Price Index (CPI) in Russia has skyrocketed, up to 9.65 percent year on year in March. Putin admits that inflation, now at over 10 percent, is too high. This comes as Russia’s 1.9 percent annual GDP growth for January to February of this year is down from 4.3 percent last year. Moreover, non-seasonally adjusted GDP may have declined for the first time since the second quarter of 2022, after Russia’s full-scale invasion of Ukraine.
Russia’s wartime economy is undergoing reverse industrialization. High-tech sectors are giving way to labor-intensive, low-productivity industries as civilian sectors are stagnating, and defense-related production is prioritized. Russia is experiencing persistent labor shortages, especially for skilled workers in technical fields. The Kremlin’s reforms of the education system to fill defense-sector vacancies have caused public concern over fairness and quality. Meanwhile, dependence on energy exports has become a liability as Western sanctions and infrastructural shortcomings have severely reduced revenues from oil and gas.
Russia’s war against Ukraine currently serves as a justification and a diversion for Putin in explaining the poor economic situation. Putin claims that the West is “seeking to fight us on the economic front” and “shutter [the Russian] economy.” In December last year, Putin claimed that the Russian economy was “growing despite everything, despite external threats and attempts to influence us.” Conversely, Putin has stated that Russia’s national defense should be top priority without “destroy[ing] our own economy” and that the “Russian economy has prevailed over the risks it faced” as “we had to respond literally on the fly, dealing with issues as they emerged.”
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