Russia's economy may "overheat" due to transition to war mode – UK intelligence

UK intelligence has predicted that the increase in inflation in Russia, driven by rising consumer prices, particularly for food and fuel, will almost certainly lead to an increase in its spending on financing the war against Ukraine. 

Source: UK Defence Intelligence review dated 6 November, reported by European Pravda 

Details: UK intelligence suggested that due to rising demand, partly due to a significant increase in defence spending, as well as ongoing pressure on the declining labour market, the Russian economy risks overheating.

According to the review, this is likely to keep inflation in Russia above the 4% target in 2024, which in turn is likely to lead to a reduction in real government spending, especially in areas such as social protection, where spending is growing faster than inflation.

"This further illustrates the reorientation of Russia’s economy to fuel the war above all else," UK intelligence summed up. 

The UK intelligence service believes it is highly likely that the Russian Central Bank will maintain high-interest rates until 2024, which is likely to increase the cost of credit for Russian consumers and will likely also affect the Russian government's debt service costs.

Background:

• Earlier, the UK Ministry of Defence drew attention to the testimony of Russian military personnel, who pointed to problems with their living conditions on the battlefield in Ukraine.
• Prior to that, UK intelligence reported that over the past three weeks, Russian occupation forces had lost about 200 armoured vehicles during the assault on the city of Avdiivka in Donetsk Oblast.

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