- Putin’s mobilization of men for the Ukraine war could hit the economy, Russia’s central bank has said.
- The draft could affect production amid a tight labor market and slow economic activity.
- More than 300,000 Russian men and their families have fled the country since the mobilization order.
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Even after several rounds of sweeping sanctions against Russia over the Ukraine war, President Vladimir Putin’s economic regime appeared to be holding its ground thanks to stable energy prices.
However, cracks are now appearing, particularly after Putin ordered a “partial mobilization” of the country’s 300,000 reservists in September, causing many Russians to flee conscription.
“The recovery in economic activity stalled in September,” the research department of Russia’s central bank said in a report on Wednesday. By the end of the month, economic conditions had deteriorated, the central bank’s research unit added.
The Central Bank of Russia did not refer to those who escaped the call, but said the mobilization created new challenges for production processes and sustaining production. It is also expected to “negatively impact consumer and business confidence,” the report said.
The bank said the partial mobilization could also make it harder for companies to hire in Russia – where unemployment has hit record lows – and in turn “will hold back overall economic activity in the coming months”.
Russia has not released figures on how many people have fled the country since Putin’s mobilization, but reports from neighboring countries put the number at more than 300,000, according to a Washington Post report on Sunday.
The fall in Russian consumer and business confidence in September came after improving over the summer, data analysis firm Morning Consult said in a report last week.
It was the first time since the early days of Russia’s invasion of Ukraine that “Russian consumers appear to be vulnerable to the economic impact of the invasion,” Morning Consult said in an email to Insider.
The Central Bank of Russia acknowledged this in the report, saying the drop in consumer sentiment could “temporarily halt” a rebound in consumption early in the fourth quarter of 2022.
“September’s events will not necessarily push Russia into an immediate recession, but the challenges are mounting,” Morning Consult analysts said.