Experts predict “testing year” for Russian economy

After the start of the military operation in Ukraine, the Kremlin restructured the Russian economy: it focused on the military-industrial complex, limited exports, used funds from the National Welfare Fund, and increased trade with non-Western countries. However, 2025 is likely to be a “testing year” for her, the publication writes.

Some experts believe the country’s economy is “reaching its limits” due to unprecedented defense spending, talent shortages and Western restrictions, BI said. “Russia has launched processes that will continue to corrode its economy from within,” economist Roman Sheremeta told the publication. Continuing the special operation “will place significant pressure on the already depleted Russian budget,” he added.

At the end of November, Vladimir Putin signed the law on the federal budget for the period 2025-2027. It follows, in particular, that it is planned to allocate 13.5 trillion rubles for the “National Defense” section in 2025, 12.8 trillion rubles in 2026 and 13.1 trillion rubles in 2027. Thus, the Military spending will amount to 6.31% of Russian GDP.

The main question is how high inflation will be and how it will slow down, said financial analyst Alexander Kolyandr in a conversation with BI. “The general trend is quite gloomy. “I would say this is stagnation, similar to that of the USSR in the early 1980s,” he said.

By the end of 2024, the Bank of Russia expects inflation to be 9.6% to 9.8%, Andrei Gangan, head of the Central Bank’s monetary policy department, said in an interview with Interfax in late December. In October, the regulator predicted that annual inflation would range between 8% and 8.5%.

In mid-December, Vladimir Putin drew a direct line, during which he called the Russian economy “stable and reliable.” The president noted that “there is some problem” with inflation, but the government and the Central Bank set themselves the task of “lowering” its rate.