In recent months, many western media commentators have suggested the Russian economy is in such serious trouble that President Vladimir Putin will soon have little choice but to end the war in Ukraine.
In December, the Washington Post reported fears among Russian businesses that interest rate hikes to combat inflation could bring the economy to a halt in 2025. More recently, an article in Politico suggested the reason Putin now seems ready to negotiate an end to the war is because he wants to “avoid a humiliating bankruptcy”.
Since Russia’s full-scale invasion of Ukraine three years ago and the subsequent imposition of tough economic sanctions, the Russian economy has unquestionably been under pressure. Problems have been accumulating and Russia does appear to be experiencing gradual economic decline – but not at all to the extent that has been claimed.
Russia’s economic performance over the last four years can be summarised by a look at the key indicators. While there are doubts as to the precision of some official Russian statistics, they still present a fair picture of the overall situation.
How Russia’s economy has changed throughout the war:
Russian official statistics suggest the economy has proved to be robust despite the war.
Rosstat and Ministry of Finance / 2025 Ministry of Economic Development forecast, CC BY-NC-ND
In spite of the war and sanctions, the Russian economy has proved to be robust. Growth has been driven to a large extent by sharply increased budget spending, not only on the military but on infrastructure projects.
These projects include investment to improve transport links with China, secure greater economic self-reliance by producing goods previously imported from the west, and tackle some of Russia’s social problems – above all, its low birth rate.
In 2025, the government is increasing its maternity payments, with first-time mothers to receive 677,000 roubles (around £5,800) – up from 630,400 roubles in 2024. Making sure Russians have “as many children as possible”, Putin’s spokesman Dmitry Peskov told the Washington Post in 2024, is “the underlying goal of our state policy”.
However, the 2.5% growth in GDP forecast for 2025 is probably overoptimistic. Problems have mounted in recent months. The Russian economy became overheated, fuelled by budget funding and generous credit, leading to inflation of at least 10%.
Increased military production, the mobilisation of personnel to the armed forces, and significant outward migration gave rise to an acute labour shortage. The end-of-year unemployment rate was only 2.3%, compared with 4.5% before the war. To attract labour and recruits, wages and payments to people signing military contracts have increased rapidly.
Russia’s central bank increased its interest rate from 16% in December 2023 to 21% in October 2024, where it remains. It is these developments that have prompted claims that Russia’s economy is heading for disaster.
But Russia has had high interest rates before: 19% in 1998 and 13.1% in 2009,