An activist takes part in an unauthorized protest in Arbat street on September 21, 2022 in Moscow, Russia. The sign plays on the word mobilization like “No burial”.
Contributor | Getty Images News | Getty Images
Russian stocks fell sharply on Monday to their lowest level since Feb. 24, when the first Russian troops entered Ukraine.
The MOEX Russia index was down 6.9% in early afternoon trading in Europe, after falling 7.4% earlier in the session.
Moscow markets have been down overall since President Vladimir Putin announced a military mobilization last week, putting Russia’s economy on a war footing and likely prolonging the conflict in Ukraine.
“From a macroeconomic perspective, the main implications for the Russian economy could come from additional Western sanctions, increased pressure on public finances and bigger problems facing labor supply. in Russia,” Liam Peach, senior emerging markets economist at Capital Economics, said Friday.
Russia has called up 300,000 reservists after losing large swaths of territory to a surprise Ukrainian counteroffensive in recent weeks, and the Kremlin is holding ‘referendums’ in parts of eastern Ukraine in the aim of consolidating the Russian presence there.
As some EU member states call for more Russian banks to be cut off from the SWIFT payment system, US senators propose tougher secondary sanctions for the G-7 oil price cap and talk about price caps of EU-wide oil, Peach suggested that Russia’s energy sector – a key pillar of economic strength – could be under threat.
“Recalling reservists and prolonging the conflict will have a cost. Russia’s federal budget ran a large deficit in August, and for the government to maintain its prudent management of public finances, tax hikes will be needed,” he said. Peach.
The call-up of 300,000 reservists, along with reports of many serving-age citizens fleeing the country to avoid conscription, could also worsen Russia’s labor supply problems, he said. He suggests.
“Official figures show a total emigration of 216,000 people in the first half of the year and unofficial figures put that number closer to half a million,” Peach said.
“For a country with a shrinking working-age population, this is a significant loss of labor and could stifle Russia’s growth prospects in the short to medium term.”