Vladimir Putin’s war on Ukraine is putting Russia’s economy under “considerable strain”, as Moscow grapples with galloping inflation, a tumbling rouble and soaring defence spending, a new US briefing claims.
As a result of the war and sanctions imposed by the West, the Russian economy is now 5pc smaller than it otherwise would have been, the assessment argues.
According to a draft statement prepared by the US Treasury, reported by the Financial Times, Moscow is now being forced to spend more than $100bn (£79bn) on defence – about one third of all government expenditure.
At the same time, the stretched budget is forcing it to hold down public sector pay increases at a time when inflation is still running at 7.5pc.
The labour market is also extremely tight because of the number of Russians who have been sent to war.
It is thought to be the most comprehensive assessment of the damage done by the war and western sanctions to Russia’s economy so far and comes as some US lawmakers are wavering in their support for sending aid to Ukraine.
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What happened overnight
A strong rally in America yesterday sent the Dow Jones Industrial Average of 30 leading US companies to a record after the Federal Reserve suggested that the interest rates cuts investors are eager for may be coming next year.
The Dow Jones rose 1.4pc to top 37,000 and surpass its prior peak of 36,799.65 from the start of last year.
The widely tracked S&P 500 index rose 1.4pc and close to its own record. The Nasdaq Composite index, which is heavily skewed towards technology stocks, gained 1.4pc.
US markets have been increasing since October amid hopes that cuts may be on the horizon, lowering the cost of business investment and encouraging consumer spending.
The yield on US Treasury bonds fell after the Fed sounded a doveish note on its plans for interest rates next year. The yields on benchmark 10-year notes dropped to their lowest since August – reaching 4.0183pc, from 4.206pc late on Tuesday.
Asian stocks broadly rallied on Thursday, with MSCI’s broadest index of Asia-Pacific shares outside Japan shooting up 1.8pc – its biggest one-day percentage jump in a month.
Mainland Chinese blue chips edged up by 0.2pc, while Hong Kong’s benchmark advanced 1.2pc. Australian shares were up 1.6pc.
However, Japan’s Nikkei slid 0.7pc, weighed down by the yen’s sharp rally.
