The puzzling aspect is the bank rate v the inflation rate. Ukr economist explained this to me by saying that some of the ‘real sector’ and certainly the defence sector are getting sweet heart deals on borrowing This leads to an official interest rate being over 10% higher than inflation. If this is true then the impact of a sustained period of very high interest rates and the attendant risks you highlight will be lower in aggregate. The subsidy costs falling on the federal budget. Apparently there are no open sources ways of checking this in fact it scope.
And all this without taking into account that, if Ukraine is able to maintain the pace of destruction of oil infrastructures, Russia will see its tax revenues seriously reduced (regardless of the price of oil) and the Russian economy may face fuel supply crises, paradoxical as it may be, as is happening with coal due to the rising costs and lack of transport capacity of the once famous Russian railroads.
The risks to the Russian economy are not only monetary.
Thanks for an interesting post. What do you mean by the "real sector"? Is that real estate?
The real sector is just non-financial businesses, so non-banks.
Thank you.
The puzzling aspect is the bank rate v the inflation rate. Ukr economist explained this to me by saying that some of the ‘real sector’ and certainly the defence sector are getting sweet heart deals on borrowing This leads to an official interest rate being over 10% higher than inflation. If this is true then the impact of a sustained period of very high interest rates and the attendant risks you highlight will be lower in aggregate. The subsidy costs falling on the federal budget. Apparently there are no open sources ways of checking this in fact it scope.
And all this without taking into account that, if Ukraine is able to maintain the pace of destruction of oil infrastructures, Russia will see its tax revenues seriously reduced (regardless of the price of oil) and the Russian economy may face fuel supply crises, paradoxical as it may be, as is happening with coal due to the rising costs and lack of transport capacity of the once famous Russian railroads.
The risks to the Russian economy are not only monetary.