Are Inflation and the Deficit Souring Russians on Their Economy?

Back in March, FilterLabs released Anxious Empire, an in-depth report on the underlying weaknesses of the Putin regime. One major weakness we observed was the Russian economy, and over the past few months FilterLabs has kept an eye on key economic indicators like inflation and the deficit. 

On Inflation

Inflation remains high in Russia, a sure sign that the economy is overheating. 

According to Russian mainstream media, however, everything is under control. The sentiment scores in stories about inflation have been relatively stable over the past year, despite inflation remaining high:

News stories reported that Anatoly Aksakov, chairman of the State Duma Committee on Financial Markets, had assured the public that inflation would be coming down soon. The head of state-owned Sberbank said that the Chairman of the Central Bank of Russia, Elvira Nabiullina, was conducting a "special operation" to combat inflation. 

The use of the phrase “special operation” for this effort was a reference to the Russian government’s official title for the war in Ukraine. Doubtless the banker meant to stir a sense of economic patriotism, but the comparison might be ill-advised. 

Like the war in Ukraine, inflation has been hard for the Kremlin to control. Although sentiment in the news coverage remained relatively neutral, the facts the media had to report were more often bad than good. The price of utilities was rising. So was the cost of higher education. At one point last month the Central Bank of Russia had to raise the lending rate to 18%. There were many articles on the declining purchasing power of the ruble, and more stories on the Russian government’s decision to end its mortgage subsidies, which had paid half of homeowners’ down payments and discounted their interest rates for the first two to five years. After the end of the subsidy, Russian experts on the real estate market predicted that the mortgage market could decline by 20%.

On social media, parts of which are further from the government’s authoritarian control (despite the Kremlin’s best efforts) and tend to show more open expression than the mainstream news, the discussion of inflation was more volatile. It also leaned more negative than the mainstream news.

Several of the peaks and valleys on the chart above track closely with the news about Russia’s subsidized mortgage program. In September and December of 2023, the government announced that it would extend the program, and sentiment scores in stories and posts about inflation (which often also discussed interest rates and housing) rose accordingly. Once the news about the program’s extension left the news cycle, sentiment cratered. 

We also noticed a sudden upward spike in sentiment between December 5th and 12th. When we dug into the underlying artifacts to see what might be behind it, we found a suspicious number of similar stories. There were lots of social media posts and comments on message boards about a revised World Bank report that ranked Russia’s economy as the 4th largest in the world, and more than 100 of the posts had virtually identical language. “Economic indicators show rapid growth of the Russian economy. It has never been as stable as it is today! This is evidenced by the most important indicators: the lowest inflation among all European countries, a significant reduction in public debt, an increase in the industrial production index and impressive GDP growth.” Similar language, a sudden shift in sentiment—these anomalies suggest a coordinated effort to inject positive economic news into the social media sphere to distract from the generally bad situation.

Outside of these dubious posts, most social media activities and forum comments about inflation were highly critical. People lamented the rising costs of coffee and other groceries. Someone posted a video from a grocery store to show the high price of eggs. “No reason to panic?” read the caption, “No, this is not the price of a good premium steak or the cost of a movie ticket! These are the prices for thirty chicken eggs in Abakan! Not golden ones! Ordinary ones.”

A few people on forums tried to say that inflation wasn’t so bad, or that reports of it were misinformation. Others quickly called them “insane” and cited real-life examples of rising prices. 

The Central Bank of Russia’s high interest rates were another frequent topic of conversation. On social media and in messaging forums, many people blamed the bank’s governor personally for the country’s economic hardship. 

In sum, there were stark differences between how the mainstream media covered inflation and how people were talking about the issue on social media. The Kremlin did not lie exactly, but it tried to present the issue in a strictly neutral way, emphasize the positive, or spin the situation as a test of the nation’s resolve. Ordinary Russians could see how inflation was making their daily life worse.

On the Deficit

A similar pattern played out on other economic issues, like the deficit. In Russian mainstream media, sentiment scores for stories about the deficit were relatively neutral and stable:

But once again, social media was a different story. Sentiment scores were lower here than in mainstream news, and the gap widened over time.

Russians discussing the deficit online complained about increasingly unreliable public transportation, the poor condition of transportation infrastructure, and driver shortages. There were concerns about teacher shortages and other labor shortages, too, and even about a shortage of cemetery space in some regions. “The population is dying out at an alarming rate,” read one post from Novosibirsk. And there were more general discussions about the budget deficit and concerns about the future of the Russian economy.

The Takeaway

There are clear differences between Russian mainstream and social media in their coverage of Russia's economy. Mainstream sources report economic news in a neutral, or even positive light. On social media, however, many ordinary Russians understand that the news is bad. 

What FilterLabs reported last March remains true today: the Russian economy is a major vulnerability for the Kremin.