The Russian economy is increasingly feeling the consequences of enormous military spending: economic growth has nearly stalled, the budget deficit is growing, and available reserves are shrinking. At the same time, economists do not yet see signs of an imminent financial crisis or economic collapse, Associated Press reports, writes UNN.
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After growing by more than 4% in 2023–2024, the Russian economy has slowed sharply. The Russian government forecasts growth of only 0.6% this year; the economy contracted in the first quarter and recovered only slightly in the second.
The mood among Russian consumers is also deteriorating. The Levada Center's consumer sentiment index fell to 94 points in the summer, compared with 116 in the spring and summer of 2025. A figure below 100 indicates that negative assessments predominate.
The deficit is growing, reserves are shrinking
One of the main problems is the state of Russia's budget. As of the end of July, its deficit had reached 2.8% of annual GDP—almost twice the initial plan for the entire year.
Available funds in the reserve fund have fallen to approximately 1.6% of GDP. As a result, the Kremlin is increasingly forced to borrow money from Russian banks.
At the same time, servicing such borrowing is expensive. According to Janis Kluge, an expert at the German Institute for International and Security Affairs, interest rates on Russian bonds reach 17%.
Budgetary stress is intensifying doubts about how long Russia will be able to continue the war
Additional pressure is being created by high interest rates, which the Central Bank of Russia is maintaining to combat inflation caused, in particular, by military spending. This is hitting civilian businesses the hardest because, unlike defense companies, they do not have privileged access to credit.
Loans from Russian banks have become another source of financing for the defense industry. Such debts are not directly reflected in budget deficit figures.
Despite the accumulation of problems, economists do not expect an immediate collapse of the Russian economy. High oil revenues still allow the Kremlin to finance the war, but the current model is gradually increasing the country's debt and budgetary burden.
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