Russian economy set for near-zero growth by 2025

Russia's economy is projected to face minimal growth as military spending disrupts civilian investment.

Russian economic growth stalls as war spending takes toll

The Russian Central Bank has issued a stark warning about the country's economic future, forecasting near-zero GDP growth by the end of 2025. As military spending continues to drive war-related economic activity, this expansion is significantly limiting civilian investment and private consumption. Following a 1.4% growth in the first quarter of 2025, growth slowed to 1.8% in the second quarter and is projected to decline further, with estimates of 0-1% by the year's end. Comparatively, the global economy is set to grow by nearly 3%. The International Monetary Fund has similarly downgraded its growth forecast for Russia to just 0.9% for 2025. The Kremlin's focus on defense spending, now 6% of GDP, has worsened capital shortages in civilian industries and increased pressures on the workforce. Inflation concerns are leading to potential price controls on essential goods. Polls indicate that rising prices are now a greater worry for citizens than the ongoing war.

The predicted slowdown in Russia's economy reflects a dangerous trend where dependence on wartime spending stifles broader economic health. The Kremlin's significant investment in defense comes at a cost, as civilian sectors face growing resource shortages and economic stagnation. This model raises questions about long-term sustainability. As inflation pressures mount, the government’s move toward controlling prices signifies a shift from a market-driven approach to a more command-style economy. This could lead to not only economic inefficiencies but also social discontent, as citizens grow increasingly frustrated with rising living costs.

Highlights

The implications of this trend could reshape Russia's economic landscape for years to come.