Russian economy meltdown as 'fruit and vegetable prices soar 20%' amid 'cash handouts'

Wage rises and cash handouts in Russia are not a sign of an improving economy but one that is “strained” and being “propped up”, a top economist has warned. In 2024, wages across the country rose by almost 18% driven in large part by conscription and Russians fleeing to avoid being dragged into Vladimir Putin’s war.

The lack of available workers, known as a labour shortage, has forced employers to work harder to attract staff, meaning that, at least in the short term, they are forced to pay more in wages. Throughout the country, consumer prices are on the rise, increasing by 9.5% year on year in December 2024., up from 8.9% the month prior. For everyday goods, the picture is much worse.

According to the economist, the price of fruit and vegetables has risen by a shocking 20% as Russian citizens continue to feel the effects of Putin’s invasion of Ukraine.

The Government has taken measures to attempt to alleviate some of the impact on regular people, with cash handouts, military signing on fees and compensation for relatives of those killed in battle, all providing short-term release.

Interest rates are at record levels of 21%, raising the amount of interest the country pays on its debt, but for a country with relatively low debt levels, this is manageable, at least for now.

The Russian Central Bank's decision in December to maintain record interest rates shocked many, with business leaders inside the country accusing governor Elvira Nabiullina of stalling the economy and war effort.

Sergei Chemezov, head of the defence and industrial conglomerate Rostech and a longtime friend of Putin, told reporters following the decision: “Today, investment programs have practically come to a standstill.”

In a post to his X social media account, Kyrylo Shevchenko - a former head of Ukraine's National Bank - wrote: "Russia’s light industry is collapsing: factories shut down, brands flee abroad, and workers move to military production.

"Garment factories relocate to China, Uzbekistan, and Bangladesh, while defence enterprises buy up the rest. Businesses cite the war as their biggest challenge, struggling against cheaper, tax-free Chinese imports.

"The final blow? The Instagram ban, which erased up to 90% of sales for small brands."

However, the potential for a partial peace in Ukraine offers Russia a lifeline.

Following Putin’s invasion, billions of dollars worth of Russian assets were seized as the West attempted to ostracise the country from the global economy.

Shevchenko added: “Much depends on the speed of peace talks and whether the West eases sanctions, offering Russia a chance to regroup.”