Russia's economy risks stalling as fighting extends beyond Ukraine and into border regions

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Russia's economy risks stalling as fighting extends beyond Ukraine and into border regions
Ukrainian soldiers fire artillery on Donetsk frontline as the Russia-Ukraine war continues in Donetsk Oblast, Ukraine on April 24, 2023.Muhammed Enes Yildirim/Anadolu Agency via Getty Images
  • The Russian economy could suffer as fighting spreads beyond Ukrainian borders.
  • Russian territory like Belgorod has seen shelling recently, forcing many residents to flee.
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Russia's economy risks stalling as fighting spreads beyond Ukraine and spills over into border regions, causing tens of thousands to flee.

Russian territory like Belgorod has been repeatedly strained by bombardment, while some cities have also reported drone strikes, such as Kursk and Krasnodar. A dozen fatalities have been reported on Russia's side.

Bloomberg Economics said full-scale fighting in border regions may lower the Russian economy's growth outlook to 0.8% for 2023.

That compares with the Russian central bank's forecast for the economy to grow by 2% this year, reaching pre-war levels at the end of next year. And the Economy Ministry has estimated GDP of more than 1%.

Given that they are home to a 10th of Russia's population, widespread hostilities in the border regions could bring down economic growth as soon as the third quarter, according to Bloomberg Economics.

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Shebekino, a border town known for producing pasta, has also undergone shelling. According to The New York Times, nearly the entirety of its 40,000 population has fled, and officials have offered financial aid to factories that lack workers.

"Hundreds of shells a day!" a resident told the Times. "Factories hit! I can't explain this."

Last month, two pro-Ukraine Russian paramilitary groups claimed responsibility for the raids in Belgorod, saying they seek to end Vladimir Putin's rule in Russia.

Russia's economy is already being squeezed by Western sanctions, which have contributed to declines in the Kremlin's oil and gas revenue.

And on Friday, Russia's central bank sounded alarms on the economy as the falling ruble and a record labor shortage add inflationary pressures.

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