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Goldman Sachs on the Potential Economic Impacts of the Wagner Mutiny

RUSSIA
  • Goldman Sachs see the risk of a weaker RUB if the response to the events over the weekend are additional spending, however the first response could be that the army intensifies its search for conscripts and volunteers amid a very tight labour market. However, with the economy currently operating close to pre-conflict levels on a labour force likely to be lower by at least 1.5%, labour shortages are currently the main constraint on the economy.
  • Goldman Sachs think the economy is already operating above potential and inflationary pressure, though so far disguised by base effects, will rise sharply. The events over the weekend increase the risk to the upside, in particular if they lead to a further expansion of the budget.
  • The authorities have plenty of resources to support the Ruble even without reintroducing some of the capital restrictions the CBR had waved on Russian nationals in recent months. Fundamentally, Goldman Sachs think the most important determinant of the Ruble are fiscal finances, in themselves a function of oil prices and spending pressures.

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