Putin called an additional 300,000 men into the military a month ago, and it's taking a toll on the economy

• Putin's mobilization of men for the Ukraine war could hit the economy, the Russian central bank said.
• The draft could impact production amid a tight labor market, and hold back economic activity.

Even after multiple rounds of sweeping sanctions against Russia over the Ukraine war, President Vladimir Putin's economic regime had seemed to be holding up, thanks to firm energy prices.

However, cracks are now beginning to show, especially after Putin ordered a "partial mobilization" of the country's 300,000 military reservists in September, which sent many Russians fleeing the draft.

"The recovery of economic activity stalled in September," the research department of the Central Bank of Russia said in a report on Wednesday. By the end of the month, the economic conditions had worsened, the central bank's research unit added.

Russia's central bank did not reference those escaping from the call-up, but said the mobilization has created new challenges for production processes and output maintenance. It is also expected to "negatively affect consumer and business confidence," the report said.

The bank said that the partial mobilization could also make it harder for companies to hire in Russia — where unemployment has hit a record low — in turn, "holding back overall economic activity in the coming months."

Russia has not released numbers on how many people have fled the country since Putin's mobilization, but reports from neighboring countries put the number at more than 300,000, according to a Washington Post report on Sunday.

The decline in Russian consumer and business confidence in the month of September came after it had improved through summer, data analytics firm Morning Consult said in a report last week.

It was the first time since the early days of Russia's invasion of Ukraine that "Russian consumers appear vulnerable to the economic impact of the invasion," Morning Consult said in an email to Insider.

Russia's central bank acknowledged this in the report, and said that the decline in consumer sentiment may "temporarily hold back" a recovery in consumption at the beginning of the fourth quarter of 2022.

"September's events will not necessarily push Russia into an immediate recession, but challenges are mounting," Morning Consult analysts said.