Militarisation will cause rising distortions in Russia

Significance Record levels of defence spending have led to surging demand for inputs used to manufacture military equipment, driving up output across various sectors. However, evidence of overheating is mounting as the surge in state spending fuels growing inflation and exacerbates shortages in the labour market. Impacts Elevated public spending plans could be upset by a sharp drop in oil export revenues. If revenue growth is slower than planned, Moscow will increase borrowing and taxation. A reduction in wartime spending could generate a sharp recession.