Russia teeters on the brink: Economic chaos threatens Putin's rule
Russia is heading towards an economic collapse that could threaten Vladimir Putin's power, predicts Jason Jay Smart. A crisis in the housing market, rampant inflation, and the decline in the value of the rouble are destabilising the country, causing social discontent and undermining the regime's foundations.
Analyst and "KyivPost" correspondent Jason Jay Smart points out that the Russian housing market is in a state of crisis. Subsidised mortgages with an interest rate of 7% have failed to curb the decline in demand. Although mortgages dominated the market not long ago, they now account for only 20% of transactions, while 80% are cash purchases, he observes.
The increase in mortgage debt to over 40% of banks' credit portfolios and a record level of household debt (22% of GDP) pose a threat to the stability of the financial system. As a result, the number of unpaid loans is increasing, particularly impacting regional banks, it reads.
Russian economic problems are growing
However, this is not the only problem facing the Russian economy. As Smart indicates, the rouble's exchange rate has fallen by over 10% three times within a month. Inflation has spiralled out of control – potato prices have risen by 80% within a year, and car prices may increase by 20% after the New Year.
As we read, the state budget, based on oil prices of $72 per barrel (€69 per barrel), is under pressure amid falling commodity prices. Meanwhile, experts are forecasting the need to devalue the rouble by 22–35% to maintain government spending.
The cost of living in Russia is rising dramatically, while wages remain unchanged. China, which could be a potential ally, is dealing with its own economic issues and cannot provide significant support to Russia, it reads.
As Jason Jay Smart notes, historically, examples show that economic crises often lead to the downfall of authoritarian regimes. Growing social discontent, loss of trust in Putin, and lack of loyalty from oligarchs are weakening his position.
Public dissatisfaction is growing as the economy crumbles.The regime’s promise of economic stability is collapsing, and so is Putin’s political contract with his people, we read in the analysis on the X portal.
