Russia's continued invasion will negatively impact outlook for its economy - British intelligence

Russia's continued invasion will negatively impact outlook for its economy - British intelligence

Russia's Central Bank has increased its interest rate by 1% to a new base rate of 16%, which is linked to rising inflation in Russia due to its war against Ukraine.

The UK Defense Ministry said this in an intelligence update published on the X social media platform, Ukrinform reports.

According to the update, this is the fifth increase since the current cycle of rises began in July 2023, when the base rate was set at 6.5%.

Russian inflation continued to accelerate towards the end of 2023, rising to 7.5% year-on-year in November, up from 6.7% in October. Overall, inflation for 2023 is estimated to be 7.4% by Russia's statistics service, nearly double the Central Bank's target.

"Russia's continued invasion is highly likely to negatively impact the outlook for the Russian economy. Imports have risen faster than exports, likely contributing to the rouble depreciating since the start of the war – highly likely a driver of inflation. As Russia ramps up its defense spending at the cost of other areas, the risk of the Russian economy overheating remains likely," British intelligence concluded.

In November 2023, Russian President Vladimir Putin signed the law on the federal budget for 2024-2026. According to the document, for the first time since the collapse of the Soviet Union, the Russian authorities intend to spend almost a third of all expenditures on the army and the defense sector.

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