**The Russian economy is showing more and more signs that growth is slowing, and economists are beginning to talk more and more about stagflation – a combination of low growth and high inflation. As no-one can openly blame the Ukraine war, the Central Bank highlights “external factors,” while business leaders and government-connected economists blame the Central Bank for imposing record high interest rates. **

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An economic slowdown is a very serious problem during a period of high inflation. And, in modern Russia, it is impossible to treat it using Reaganite methods: slashing spending and reducing regulation to attract foreign investment. Cutting funding for the war and the defense sector is politically inconceivable in Russia at the moment. Even acknowledging that the war and sanctions triggered this cycle of overheating and decline is impossible. That means the Central Bank may well end up being held responsible.

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The Central Bank earlier this month published a report analyzing financial flows. The conclusion was that Russia is on the verge of an economic slowdown. In October, the volume of incoming payments via the Central Bank’s payment system (about half of all payments made in Russia) was down 2.9% compared with the third quarter average. This sort of decline was visible in all industries the Central Bank studied.

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The slowdown is not simply due to declining output in the raw material extraction industries (this has been ongoing for several months amid falling export prices), but also a stuttering manufacturing sector. The only place growth is still noticeable is in sectors linked to the military. Everywhere else in the economy growth is absent, or, at best, anemic.

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All this data has prompted economists to revise downward their projections for Russian GDP growth.

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In a report published Monday, economists from the Institute of Forecasting at Russia’s Academy of Science said that “slowing economic activity and deterioration of financial indicators are becoming increasingly evident in a number of sectors.” And Russia’s Center for Macroeconomic Analysis and Short-term Forecasting (CMASF) spoke openly in a report Wednesday about possible stagflation. The center (run by the brother of Defense Minister Andrei Belousov) flagged the risk of a recession and falling productivity, especially in low-profit sectors and industries with long project implementation timeframes.

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Russian business leaders line up to attack Nabiullina

Executives at big Russian companies who are unhappy with interest rates at 21% have been angrily criticizing the Central Bank and its head, Elvira Nabiullina. Influential lobby group, the Russian Union of Industrialists and Entrepreneurs (RSPP), this week even suggested forcing the Central Bank to coordinate its monetary policy with the government.

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