Kremlin faces hindrances in its fight against demographic decline due to economic restrictions - ISW
The Russian government will find it difficult to ensure payments (Illustrative photo: Getty Images)
Due to sanctions and other factors, the Kremlin faces economic limitations. This is likely to hinder its efforts to impose policies aimed at combating the long-term demographic decline in Russia, according to the US Institute for the Study of War (ISW).
Before reaching their conclusion, analysts recalled a statement made by the governor of the Nizhny Novgorod region, Gleb Nikitin, on December 23. He announced that in 2025, the region would provide a maternal capital payment of 1 million rubles (approximately $10,000) for the birth of each child.
Nikitin clarified that the Nizhny Novgorod authorities would allocate one million rubles for the first and second children from federal and regional funds, and another million rubles for the third and fourth children exclusively from the regional budget.
Experts at the ISW believe that regional authorities in Russia are likely to continue expanding maternal capital payments in line with the Kremlin's directive to address long-term demographic issues. However, the Russian government may struggle to sustain large maternal capital payouts over time due to the ongoing strain on the Russian economy from the war in Ukraine, as well as international sanctions and the growing labor shortage.
Furthermore, the Russian state news agency RIA Novosti reported on December 24 that it had seen a letter sent by the Central Bank of Russia in response to a request from State Duma deputy Denis Parfenov. In the letter, the Central Bank stated that lowering the key interest rate to stimulate demand, when demand already exceeds supply, is dangerous.
The Central Bank also noted that the current shortage of labor, equipment, and transport in Russia means that cheap loans will not immediately provide producers with additional resources but will only intensify competition for resources and drive up prices.
Analysts reminded that the Central Bank of Russia raised the key interest rate to 21% in October 2024, and the bank's head, Elvira Nabiullina, recently stated that the rate could be raised even further.
On the other hand, Russian President Vladimir Putin, during the direct line on December 19, tried to portray the Russian economy as stable and reliable and also blamed the Central Bank of Russia and Nabiullina for mishandling the interest rate hikes.
Last month, the British Ministry of Defence reported that Russia's economic problems would intensify in 2025. The reasons for this would be military expenditures and the impact of Western sanctions.
