Rouble reaches record low as economy struggles under sanctions
- Over three years, Russia's National Welfare Fund liquid assets have decreased from $140 billion to $53.8 billion.
- Recent U.S. sanctions have made it difficult for Russian importers to pay Chinese suppliers, leading to a reliance on intermediaries.
- The combination of a falling rouble, rising inflation, and increasing budget deficits is creating significant economic challenges for Russia.
In Russia, the National Welfare Fund (NWF) experienced a significant decrease in liquid assets over the past three years due to ongoing military expenditures and economic disruptions from sanctions. As of December 1, 2024, the NWF's assets have dwindled to $53.8 billion, down from approximately $140 billion prior to the full-scale invasion of Ukraine. This reduction highlights a broader fiscal imbalance, with projected deficits increasing annually, anticipating a total shortfall of $61 billion by 2027. Additionally, recent U.S. sanctions imposed on over 50 Russian banks have further complicated financial transactions, particularly hampering the ability of Russian importers to conduct business with Chinese suppliers. Consequently, importers are now resorting to complex and clandestine methods for payment, underscoring the intensifying economic strain. As economic pressures mount, the rouble has plummeted to its lowest exchange rate against the dollar since the Ukraine invasion, falling 20% within the year. Russia's escalating inflation, now exceeding 8%, has resulted in heightened interest rates, currently at 21%. Despite robust efforts to maintain its economy through government spending on the military, these economic measures have paradoxically led to greater challenges in managing inflation and stabilizing the currency. Experts warn that without significant intervention, a drastic economic downturn could occur as early as 2025. The current fiscal trajectory suggests an increasingly precarious situation for the Russian economy, creating potential risks for societal stability and long-term recovery amidst international economic isolation.