Economic constraints will hinder the Kremlin's efforts to combat demographic decline, according to ISW.

Due to sanctions and other factors, the Kremlin faces economic constraints. This is likely to hinder its efforts to impose policies aimed at combating the long-term demographic decline in the Russian Federation.

This information comes from RBK-Ukraine, citing a report by the American Institute for the Study of War (ISW).

Before reaching this conclusion, analysts recalled a statement made by the governor of the Nizhny Novgorod region, Gleb Nikitin, on December 23. He stated that the region would provide a maternal capital payment of 1 million rubles (approximately 10 thousand dollars) for the birth of each child in 2025.

Nikitin clarified that the authorities of the Nizhny Novgorod region would allocate one million rubles for the first and second child from federal and regional funds, and would allocate another million rubles for the third and fourth child exclusively from the regional budget.

Experts at ISW believe that regional authorities in Russia are likely to continue expanding maternal capital payments as part of the Kremlin's directive to address long-term demographic issues. However, the Russian government may find it challenging to sustain large maternal capital payments over time, as the Russian economy is under constant strain due to the war in Ukraine, as well as international sanctions and a growing labor shortage.

Additionally, the Russian state news agency RIA Novosti reported on December 24 that it had reviewed a letter from 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 percent in October 2024, and bank head Elvira Nabiullina recently stated that the bank might increase it further.

In turn, Russian dictator Vladimir Putin attempted during the "Direct Line" on December 19 to portray the Russian economy as "stable and reliable," while blaming the Central Bank of Russia and Nabiullina for mishandling the interest rate hikes.

It’s worth noting that last month, the British Ministry of Defense reported that economic problems in the Russian Federation would worsen in 2025. This will be attributed to military expenditures and the impact of Western sanctions.