Reuters named five main challenges for the Russian economy in 2025

Experts describe the year 2025 as a “perfect storm” with several negative factors acting simultaneously. “After several years of very strong economic dynamics [России] in 2025 it may disappoint,” said Dmitry Polevoy, chief investment officer at Astra Asset Management.

annual inflation in the country in 2024 it reached 9.5% in a context of high government spending on defense and national security. It is expected that in 2025 they will represent 41% of total budget spending. Inflation is also fueled by government loan subsidies and rapidly rising wages amid a labor shortage, the agency writes.

According to him, in the last 15 years inflation in Russia was highest only in 2022, the first year of the military operation in Ukraine, and also during the economic crisis of 2014-2015, which followed the annexation of Crimea. Inflation also tops the list of economic concerns in opinion polls, with prices of staples such as butter, eggs and vegetables set to see double-digit increases in 2024.

Economists consider second test for Russian economy in 2025 high key ratewhich the Central Bank left at a record level of 21% annually in its December meeting.

Experts say the high official interest rate is hurting the civilian sector of the economy, while the heavily subsidized defense sector remains unscathed. Business representatives say that with the current cost of capital around 30% and profitability at no more than 20%, investment activity has virtually stopped in most industries.

The government predicts that by 2025 economic growth will slow to 2.5% from about 4% in 2024 as a result of measures to cool the economy. At the same time, the International Monetary Fund expects Russian GDP to grow only 1.4% this year, Reuters highlighted.

The agency added that the situation is aggravated by the personnel shortage that arose in the context of the military operation. Economists say the continued injection of money into the defense sector is creating an imbalance in the economy and could lead to recession and bankruptcies.

The last two challenges for the Russian economy are Budget deficit and ruble volatility.. Reuters indicated that the deficit in 2024 reached 1.7% of GDP, and Russia’s National Welfare Fund, the main source of financing the deficit, was depleted by two-thirds during the three years of the military operation. The ruble fell to its lowest level since March 2022 on January 2 after months of volatility caused by Western sanctions.

The day before, Reuters reported that sources said Vladimir Putin was unhappy with the “serious problems” in the Russian economy. In particular, according to the agency’s interlocutors, the president does not like the reduction in investments due to the high cost of loans. His press secretary, Dmitry Peskov, commented on the publication and noted that the Russian economy, despite the problems, is considered stable.