**Russia’s War-Fueled Economy Falters**
Russia’s economic growth is slowing down, according to a recent report by the Russian Central Bank. The bank predicts that GDP will expand by near-zero by the end of 2025, marking a significant decline from previous years.
The slowdown is largely due to the country’s reliance on military spending at the expense of civilian investment and private consumption. In the first quarter of 2025, Russia’s economy grew by just 1.4%, down from 3% in 2024. The second quarter saw a slight improvement to 1.8%, but the Central Bank expects a slowdown to 1.6% in the third quarter.
**Consequences of War-Driven Growth**
The Russian government has been pouring money into its military, pushing up defense spending to 6% of GDP – its highest level since the Cold War. However, this has come at a cost, with civilian industries facing shortages of capital and labor due to the ongoing conflict.
Central Bank Governor Elvira Nabiullina warned in June that the economy had reached “the edge of capacity,” while Economy Minister Maxim Reshetnikov said Russia was “on the verge of a transition to recession.”
**Inflation and Price Controls**
High inflation has also taken its toll on Russia’s economy, with the government considering price controls on key food items. This move has been met with criticism from experts who warn that it could lead to shortages and long queues.
“Russia is now shifting toward a fully planned, command-style system, with all its usual flaws – constant food shortages, long queues, and everything else that comes with it,” said Igor Lipsits, a Russian-born economist.
**Public Concerns**
A recent poll by the Levada Center found that 58% of Russians named rising prices as their top concern, while only 33% mentioned the war. This highlights the growing frustration among citizens with the economic situation and the government’s handling of it.
“The price hikes are very significant,” said Maria Snegovaya, a senior fellow at the Center for Strategic and International Studies. “It undermines their ability to keep pretending that ‘everything is fine and nothing is happening.'”
**Impact on Global Economy**
The slowdown in Russia’s economy has significant implications for the global economy. The International Monetary Fund has cut its growth estimate for Russia to 0.9%, down from 4.3% in 2024.
Russia’s authoritarian system allows for some flexibility, but strictly limits it to the economic sphere. As a result, experts warn that the country may be heading towards a recession.
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