Russia going bankrupt while Ruble ₽ tanks, colossal losses in Ukraine, their economy is in big trouble

Russia's economic path looks unsustainable 

Echo report published in Business Insider by Theron Mohamed

Putin tells Russians there's no reason to panic 😳😮💥as the ruble sinks, but analysts say its economy is in trouble ❓❗😕

• Russian President Vladimir Putin said the ruble's plunge to two-year lows was no cause for panic.
  
• The Russian currency ₽, hit its lowest level against the dollar since March 2022, this week. (0.094 to US💲 IOW< $0.01)
• Analysts say Russia is under pressure from inflation, military spending, and falling oil prices.

Russians shouldn't stress about the ruble tumbling to two-year lows, Vladimir Putin said Thursday. But, (guess what❓)analysts told Business Insider there is plenty of cause for concern.

Putin attributed the ruble's fluctuations "not only to inflation but also to budget payments and oil prices," along with many seasonal factors.

The Russian currency traded at its weakest level since March 2022, shortly after the Ukraine invasion began. In fact, the ₽ currency has depreciated by 36%, in under four months. A greenback was worth about 108 rubles on Friday (November 22, 2024).

Russia's central bank stepped in to shore up the floundering ruble on Wednesday. It suspended purchases of foreign currency on the domestic market for the rest of this year to reduce volatility.
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The Russian leader told reporters that the "situation is under control" and that "there are absolutely no grounds for panic," according to a Google translation of a report from the RIA Novosti news agency.

A Wednesday headline in the state newspaper Rossiyskaya Gazeta read, "Panic attack for Russia's currency market." The Kommersant newspaper warned readers to "buckle up your rubles."

The ruble's latest plunge follows the US sanctioning Gazprombank, one of Russia's largest lenders. The restrictions limit the bank's ability to access global financial markets and handle energy payments.

A weakening ruble benefits Russian exporters by making their goods more competitive in global markets. But it threatens to accelerate inflation by raising the cost of imports, leaving sellers little choice but to increase their prices. Stubborn inflation has already spurred Russia's central bank to raise the main interest rate to 21%, the highest level since 2003.

The Russian economy has suffered from Western sanctions imposed since Putin's invasion of Ukraine, with energy revenue tanking by almost a quarter last year. Other countries, such as India, have snapped up Russian oil instead, tempering the impact of price caps and other penalties.

Mounting pressure on Russia: Russia also fired a hypersonic missile into Ukraine last week after its opponent launched missiles at targets inside Russia for the first time. The escalation has raised concerns of further economic disruption.

Robin Brooks, a senior fellow focused on the global economy and development at the Brookings Institution, posted on X, that the ruble's collapse shows how vulnerable Russia is to sanctions.

He also said the European Union's reluctance to impose certain penalties might have staved off economic disaster in Russia.

George Pavel at the trading platform Naga.com told BI the ruble's dive had been driven by rising inflation and a widening budget deficit fueled by heavy military spending.

"Russia's economic path looks unsustainable barring major changes," he said, ticking off concerns such as slowing growth, stubborn inflation, a tight labor market, and the massive cost of the Ukraine war.

Brent crude is trading at just over $70 a barrel, and sliding oil prices pose an existential threat to Russia, said Kathleen Brooks, research director at XTB.

"Russian income is shrinking at the same time as defense spending is surging as the war with Ukraine enters a more intense phase," Brooks said. "While President Trump may go some way to ending the Russia-Ukraine war, his policy on energy and plans to get the US pumping even more oil could weigh on the oil price further in 2025, which is bad news for Russia."