Sputnik/Sergei Ilyin/Kremlin via REUTERS
- Putin is handling Russia's economy the same way he handles his yacht: heavy-handed.
- That's according to a former Russia central bank advisor, who said the nation's economy is in a precarious position.
- Military spending is also set to exceed social spending for the first time ever in Russia's modern history, she added.
Russia's economy has held up so far, but Moscow is battling a host of problems as President Vladimir Putin wields a heavy hand.
That's according to Alexandra Prokopenko, a scholar at the Carnegie Russia Eurasia Center and former advisor to the Bank of Russia.
Putin is under pressure to continue military spending high, which is currently the main driver of growth in Russia's economy. But such "nonproductive expenditures" also stoke inflation, meaning the central bank must keep rates higher for longer, she explained.
Meanwhile, the Kremlin's capital controls and breaking of budgetary rules make it more complicated for Putin to deal with future shocks.
"At the moment, the economy looks resilient. But it's like Putin navigates it the way he navigates his yacht, as if it's an icebreaker. But it's not," Prokopenko said in a recent interview with the Carnegie Politika podcast.
Putin is known to have a small collection of superyachts. One of his most valuable ships, a $100 million vessel named The Graceful, was abruptly moved out of a German port right before Russia began its invasion of Ukraine last year.
She also pointed to Putin's handling of Moscow's finances, noting that military spending is set to exceed social spending for the first time ever in Russia's modern history.
That kind of spending raises questions about sustainability over the long-run, Prokopenko added, as Moscow's budget hinges on highly optimistic assumptions on oil prices and progress on fighting inflation.
Other economists have warned of a grim future for Russia's economy as war ravages Moscow's finances. Russia could become a failed state within the next decade as its economy flounders, according to experts surveyed by the Atlantic Council.