The war in Ukraine is starting to have a cost for the Russian economy, faced with sudden slowdown due to the drop in oil income and Western sanctions. She is “On the verge of recession”recognized Maxim Réchetnikov, the Minister of the Economy, during the Saint Petersburg Forum, the “Russian Davos” in June.
An observation immediately refuted by Vladimir Putin, quick to praise the resilience of Russia in the face of sanctions. But the figures do not lie. In July, the International Monetary Fund reduced the country’s growth forecast, from 1.5 % to 0.9 % for 2025. We are far from the mini rates – 4 %, affected in 2023 and 2024 – when the State had put all its financial resources at the service of war.
Another worrying sign, the budget deficit exploded, reaching, according to the Ministry of Finance, 4.9 Billions of rubles (around 56 billion euros) at the end of July, which represents a 30 % exceeding of the annual objective that the government had set for itself. The economic slowdown, the drop in oil and gas income, but also that of reserve funds, practically engulfed by three years of war, constitute a new reality: there will be cuts. The Ministry of Finance can hardly cut in defense and security, which represent just over 40 % of expenses. The government will therefore have to reduce social contributions, but also support for civil industries.
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