Moscow thus faces deepening of the budget deficit and weak oil prices. And all this under the threat of further sanctions of the West. TASR informs about this on the basis of AFP report. Huge army spending helped Russia to avoid the collapse of the economy after the offensive in Ukraine began in 2022.
The most important supporters of Kiev are heading to Canada to meet the G7 (seven richest economies in the world) on Sunday (15 6th). US President Donald Trump will face pressure to impose new sanctions on Moscow. The Russian economy is already showing signs of fatigue. “It is no longer possible to pull the economy only a military-industrial complex,” AFP told Natalia Zubarevičová, an economist from the Moscow State University.
Government spending from the offensive jumped by 60 %, while military expenditure is now, according to President Vladimir Putin, at 9 % of the gross domestic product (GDP). The Russian economy grew by 1.4 %year -on -year in the 1st quarter of 2025. However, the pace of its growth slowed noticeably from 4.1 % in the same period last year and was the least in two years. The Russian central bank predicts a maximum of 1-2 %this year.
Putin, who enjoyed the strong performance of the economy, downplayed concerns. “We do not need such rapid growth,” he said at the end of last year when the slowdown began. According to him, rapid expansion brings a risk of “imbalance in the economy, which could cause damage in the long run”.
One of the manifestations of imbalance is the high inflation rate, which is around 10 %. Russian central bank last week lowered interest ratesstated that the rise in consumer prices was alleviated. But still high loan costs in combination with falling oil prices are the main factors of the economy slowing down.
Energy income is more than a quarter of government income. This year, Russia has increased taxes for businesses and people with high incomes. But this measure “covers only a loss of income from oil sales”, Zubarevičová pointed out. Given the more tensful funds, the Russian Parliament was forced to adjust state spending plans for 2025 this week. Now he expects a budget deficit of 1.7 % of GDP, three times higher than originally expected.
Ukrainian President Volodymyr Zelenskyj urges Trump to impose a new penalty package of sanctions on Moscow for refusing a ceasefire and continuing the bombing of Ukrainian cities. However, Trump’s intentions are not clear. Some American senators, including Republicans, have suggested to hit the countries that buy Russian oil, massive duties to try to disrupt the dollar billion flow to Moscow from China and India.
Moscow describes sanctions as an ineffective tool that has turned against Europe and the United States. He claims to be able to continue the struggle for years no matter what the West is doing as it has directed its economy to the army service. Moscow still has cash to keep the conflict for a long time, and Zubarevičová believes. “Certainly in 2025. The year 2026 will be a little harder, but it will reduce other expenses,” added.
