Resilience in Russia’s 2022–25 economy is fading as war spending slows growth, entrenches inflation and amplifies structural fragilities.

In 2022-2025 the Russian economy demonstrated resilience despite the increasing costs of the war in Ukraine and the extensive economic and financial sanctions imposed on Russia by the coalition of Western countries. Fiscal accounts, though under strain, have remained under control. However, after nearly four years of war, the associated fiscal and quasi-fiscal costs have grown significantly and started to challenge macroeconomic and financial stability. Inflation has been well above the Bank of Russia’s target. The high growth rates in 2023-2024, fuelled by war-related public spending and a corporate credit boom, have decelerated in 2025 due to capacity constraints. Nevertheless, the Russian government still has the fiscal capacity to continue the war in the short term. It has some fiscal reserves, can increase domestic borrowing and may seek to raise further non-hydrocarbon taxation. 

The long-term perspectives look much worse. Structural and institutional weaknesses, such as the adverse demographic trends, the continuous dependence on hydrocarbon production and exports and the poor business and investment climate will be magnified by the costs of the war and sanctions, increasing isolation from the West and entrenching an inward-oriented development strategy.

Source : Bruegel