Ukraine has stopped paying veterans to go to the gym because of the economic crisis looming in the country, the war, Russian strikes, and the lack of reforms needed to receive extra funds from the EU. The Veteran Sports program, which provided veterans and combat participants with about $33 per quarter toward a nearly monthly gym membership, was suspended on 1 October after the state found no funds for it, the Ministry of Veterans Affairs said.
The suspension is a telling sign of Ukrain
Ukraine has stopped paying veterans to go to the gym because of the economic crisis looming in the country, the war, Russian strikes, and the lack of reforms needed to receive extra funds from the EU. The Veteran Sports program, which provided veterans and combat participants with about $33 per quarter toward a nearly monthly gym membership, was suspended on 1 October after the state found no funds for it, the Ministry of Veterans Affairs said.
The suspension is a telling sign of Ukraine's budget squeeze, and the ministry puts it plainly: defense comes first, so the money for everything else runs short. It fits a wider government decision to freeze non-essential spending and fund only the army, pensions, and public wages.
The program proved far more popular than planned, drawing more than 800,000 users and costing over double its budget.
Defense takes the money
"The main priority of state spending remains the country's defense. Under these conditions, the state budget's ability to finance other areas is limited," the ministry said.
Launched in 2026 with about $13 million for an expected 100,000 recipients per quarter, and roughly 300,000 applications over three, the program instead saw more than 800,000 uses. Payments passed $27 million, more than twice what was set aside.
The crisis runs deeper
The squeeze has two main drivers. Russia's intensifying strikes on Ukraine's energy and infrastructure are pushing the war's cost higher and battering the economy.
And billions in Western money sit on hold: Kyiv has struggled to complete the reforms the EU set out before releasing roughly $20 billion in aid, and the prime minister has admitted that part of it is late because Ukraine missed commitments to its partners.
The ministry plans a 2027 restart
Ukraine intends to bring the program back in 2027, this time for good, said Deputy Veterans Minister Ruslan Prykhodko.
"We have to account for real demand, fix the shortcomings we saw this year, and make the use of funds more targeted," he said.
In next year's budget, Ukraine would provide significantly more funds, he added. In the meantime, the ministry says it is talking to the sports community and businesses about covering the gap for veterans, with concrete proposals to come.
Russia plans to sharply increase military spending in 2027 while expanding the authorized size of its armed forces, according to budget documents seen by Reuters and a report by Novaya Gazeta Europe.
The developments point to Moscow preparing to expand its war effort into next year, even as its battlefield gains remain limited and its campaign increasingly relies on missile and drone attacks against Ukrainian cities and civilian infrastructure. It is also doing so as the Russian governm
Russia plans to sharply increase military spending in 2027 while expanding the authorized size of its armed forces, according to budget documents seen by Reuters and a report by Novaya Gazeta Europe.
The developments point to Moscow preparing to expand its war effort into next year, even as its battlefield gains remain limited and its campaign increasingly relies on missile and drone attacks against Ukrainian cities and civilian infrastructure. It is also doing so as the Russian government faces a widening budget deficit and falling projected oil and gas revenues.
Russia plans 27% increase in 2027 defense spending despite widening budget deficit
Russia plans to spend 17.1 trillion rubles ($202.6 billion) on defense in 2027, according to government documents reviewed by Reuters. That is about 27% more than the 13.5 trillion rubles originally budgeted for defense in 2027 and would be the highest level of military spending since Russia launched its full-scale invasion of Ukraine in February 2022.
The documents project total defense spending of 50 trillion rubles over the next three years. The actual amount Russia will spend on defense in 2026 is classified, Reuters reported, while some military-related spending can be recorded under other parts of the state budget.
The planned increase comes alongside worsening fiscal pressures. Russia has raised its forecast for the 2026 budget deficit to 3.2% of GDP, from an earlier estimate of 1.6%, according to Reuters. Overall government spending is expected to rise 13.2% this year to 48.6 trillion rubles, or 20.9% of GDP.
The government also expects to increase net borrowing by 26% in 2026 to 5 trillion rubles and withdraw 459 billion rubles from its National Wealth Fund, Reuters reported. Its forecast for 2026 oil and gas revenues has been cut to 7.6 trillion rubles from 8.9 trillion.
Russia is reportedly planning new tax increases for 2027 to help cover the growing deficit. A new windfall tax on metals and mining companies is expected to bring in about 200 billion rubles a year, according to the documents. State debt is projected to rise to 21.7% of GDP in 2027, above the 20% level Russian authorities have previously considered safe.
The draft budget is expected to be submitted to Russia's parliament by October 1.
Army staffing also reaches new high
At the same time, Russian President Vladimir Putin has again increased the authorized size of the country's armed forces.
Putin signed a decree raising the official staffing level of the Russian Armed Forces to 2.44 million people, including 1.55 million military personnel, Novaya Gazeta Europe reported on September 28. The increase is 15,500 personnel compared with the previous decree issued in August.
It is the fourth increase in the authorized size of the Russian military in 2026 and the seventh since the beginning of the full-scale invasion of Ukraine, according to Novaya Gazeta Europe. Before the invasion, the authorized force stood at 1.90 million people, including 1.01 million military personnel.
Russia shifts more of the war into the air
The increases in military staffing and spending come as Russia continues to pursue its maximalist war aims despite limited battlefield progress. The Institute for the Study of War assessed on September 27 that Russia's frontline has remained largely static in recent months and that the Kremlin is increasingly relying on long-range missile and drone strikes as part of its effort to force Ukraine to capitulate during the winter of 2026–27.
ISW assessed that Putin may be trying to make Ukraine's infrastructure and air defense capacity buckle under sustained Russian strikes rather than relying solely on further territorial gains. The institute also said the Kremlin may delay a large-scale mobilization while it assesses whether its expanded long-range strike campaign can achieve its objectives.
The planned increase in military spending and the repeated expansion of the armed forces show that Moscow is preparing to sustain and expand its war effort into 2027, even as its forces make limited territorial gains in Ukraine.
The European Commission is discussing with EU member states various options to cover Ukraine's budget deficit for next year, which could range from $8 billion to $19 billion, the Financial Times reported on July 8.International partners have provided Ukraine with over $39 billion for its wartime economy so far this year, Prime Minister Denys Shmyhal announced.The financial hole in Ukraine's budget is linked to reduced U.S. support and the lack of prospects for a swift ceasefire with Russia that
The European Commission is discussing with EU member states various options to cover Ukraine's budget deficit for next year, which could range from $8 billion to $19 billion, the Financial Times reported on July 8.
International partners have provided Ukraine with over $39 billion for its wartime economy so far this year, Prime Minister Denys Shmyhal announced.
The financial hole in Ukraine's budget is linked to reduced U.S. support and the lack of prospects for a swift ceasefire with Russia that Europe had hoped for, the Financial Times reported.
A senior EU official told the publication that many of Ukraine's partners had previously counted on a peace deal in 2025, but are now forced to revise their funding plans.
This includes the European Commission, which has already adjusted spending from Ukraine-related funding streams.
Without support from Western partners, Kyiv would face a budget deficit of $19 billion in 2026, according to the Financial Times. However, even if additional international financing for the wartime economy can be secured, a gap of at least $8 billion would remain.
To support Ukraine's budget, Europe is considering providing military aid in the form of off-budget grants that would be recorded separately as external transfers but would count toward NATO member countries' national defense spending targets.
One EU diplomat told the Financial Times that military support for Ukraine is viewed as a contribution to the defense of all of Europe.
In a document for G7 countries reviewed by Financial Times, Kyiv proposed that European allies co-finance Ukrainian forces, framing this as a service to strengthen continental security.
Other support options under discussion include potentially accelerating payments from the existing $50 billion G7 loan program and reinvesting frozen Russian assets in higher-yield financial instruments that the EU allocated to help service the debt.
According to the Financial Times, two sources confirmed that the commission planned to discuss these options with EU finance ministers on July 8.
The funding issue will also be raised at the Ukraine Recovery Conference in Rome on July 10-11, dedicated to Ukraine's reconstruction needs. European Commission President Ursula von der Leyen will attend the event.
Russia's economy, which defied initial sanctions and saw growth propelled by massive military spending and robust oil exports, is now showing significant signs of a downturn. Recent economic indicators are flashing red, with manufacturing activity declining, consumer spending tightening, and inflation remaining stubbornly high, straining the national budget, the Wall Street Journal (WSJ) reported on July 4. Russian officials are openly acknowledging the risks of a recession. Economy Minister Max
Russia's economy, which defied initial sanctions and saw growth propelled by massive military spending and robust oil exports, is now showing significant signs of a downturn.
Recent economic indicators are flashing red, with manufacturing activity declining, consumer spending tightening, and inflation remaining stubbornly high, straining the national budget, the Wall Street Journal (WSJ) reported on July 4.
Russian officials are openly acknowledging the risks of a recession. Economy Minister Maxim Reshetnikov warned last month that Russia was on the "verge of a recession," while Finance Minister Anton Siluanov described the situation as a "perfect storm." Companies, from agricultural machinery producers to furniture makers, are reducing output. The central bank announced on July 3 it would debate cutting its benchmark interest rate later this month, following a reduction in June.
While analysts suggest this economic sputtering is unlikely to immediately alter President Vladimir Putin’s war objectives—as his focus on "neutering Ukraine" overrides broader economic concerns—it exposes the limits of his war economy.
The slowdown indicates that Western sanctions, though not a knockout blow, are increasingly taking a toll. If sanctions intensify further or global oil prices fall, Russia’s economy could face more severe instability. This downturn undermines Putin's strategic bet that Russia can financially outlast Ukraine and its Western allies, suggesting Moscow may struggle to finance the war indefinitely.
Experts warn that Russia's economic growth model, overly reliant on military spending, is unsustainable and necessitates a contraction of civilian economic capacities to free up workers for the war machine, which is not a viable long-term strategy. Putin recently dismissed suggestions that the war is stifling the economy, echoing Mark Twain by stating reports of its death "are greatly exaggerated." However, he also cautioned that a recession or stagflation "should not be allowed under any circumstances."
After a brief recession in 2022, military spending, which accounts for over 6% of gross domestic product this year (the highest since Soviet times) and approximately 40% of total government spending, had propped up Russia’s economy and blunted the impact of Western sanctions. Russia’s ability to reroute oil exports to China and Beijing’s support with electronics and machinery provided additional economic stimulus. This created an economic paradox: the most sanctioned major economy was, for a period, growing faster than many advanced economies.
However, this military spending "sugar rush" fueled runaway inflation, compelling the central bank to raise interest rates to a record 21% to try and tame it. Higher interest rates increased borrowing costs for businesses, curbing investment, expansion plans, and squeezing profits. The economic comedown has already begun.
Official data shows Russian GDP growth slowed to 1.4% in the first quarter compared to a year earlier, down significantly from 4.5% in the fourth quarter of 2024. S&P Global’s purchasing managers’ index indicated Russia’s manufacturing sector contracted at its sharpest rate in over three years in June, and new car sales dropped nearly 30% year-over-year in June.
Businesses across Russia are feeling the effects, according to the WSJ. Rostselmash, the country’s largest producer of agricultural machinery, announced in May it would cut production and investment, and pull forward mandatory annual leave for its 15,000 employees due to a lack of demand. In Siberia, electricity grid operator Rosseti Sibir stated it was on the verge of bankruptcy due to high debt, halting investments and proposing tariff hikes for industrial users.
While some analysts argue the Russian banking system remains stable, others warn of increasing instability. A recent report by the Washington, D.C.-based Center for Strategic and International Studies (CSIS) highlighted risks from a government decision to control war-related lending at major Russian banks. The state could direct banks to offer preferential loans, potentially forcing the government to absorb losses if high interest rates prevent companies from meeting obligations.
The Moscow-based Center for Macroeconomic Analysis and Short-Term Forecasting also assessed in May that the risk of a protracted systemic banking crisis in 2026 was "moderate" and growing.
These economic challenges intensify pressure on the Kremlin by reducing its financial capacity to fund its war in Ukraine. The government has operated with a budget deficit throughout the war and projects this will continue for at least two more years. This fiscal strain could provide an opening for Western nations to implement more powerful sanctions.
Falling oil prices present another significant risk for Russia, as energy sales account for about a third of its budget revenues. The price of Russian crude has consistently remained below the level assumed in this year’s budget, and Russia’s oil-and-gas revenue in June fell to its lowest level since January 2023, according to Finance Ministry data.
BlackRock, a U.S. investment firm, suspended work on a multibillion-dollar Ukraine recovery fund following U.S. President Donald Trump's election victory, prompting France to work on a replacement, Bloomberg reported on July 5.The plan nearly secured the initial support of institutions backed by the governments of Germany, Italy, and Poland, people familiar with the matter told Bloomberg.Kyiv has sought to secure investment in Ukraine's reconstruction as Russia's war continues to destroy infrast
BlackRock, a U.S. investment firm, suspended work on a multibillion-dollar Ukraine recovery fund following U.S. President Donald Trump's election victory, prompting France to work on a replacement, Bloomberg reported on July 5.
The plan nearly secured the initial support of institutions backed by the governments of Germany, Italy, and Poland, people familiar with the matter told Bloomberg.
Kyiv has sought to secure investment in Ukraine's reconstruction as Russia's war continues to destroy infrastructure across the country.
BlackRock halted its search for institutional investors in January, causing the planned funding that sought to secure $500 million from governments, development grants, and investment banks, and another $2 billion from private investors, to fall through.
The investment firm halted talks with institutional investors in January due to a lack of interest amid perceived uncertainty in Ukraine.
The fund was set to be unveiled by BlackRock at the upcoming Ukraine Recovery Conference on July 10-11 in Rome, Bloomberg reported.
A spokesperson for BlackRock said the investment firm completed advisory work for the recovery fund pro bono in 2024 and no longer has "any active mandate."
France is working on a proposal to replace the recovery fund led by BlackRock, people familiar with the matter told Bloomberg, adding that it remains uncertain how effective the plan will be without Washington's backing.
President Volodymyr Zelensky and Italian Prime Minister Giorgia Meloni are expected to attend the Ukraine Recovery Conference next week.
Despite a partial rebound from a 30% economic slump in 2022, foreign investment in Ukraine remains underwhelming.
Iran is reportedly preparing to mine the Strait of Hormuz, a move that would spike global oil prices and give a significant boost to the Russian economy and its war machine in Ukraine.Reuters reported on July 1 that Iran loaded naval mines onto vessels in the Persian Gulf last month, citing two U.S. officials, who said the preparations had been detected after Israel launched its "preemptive" attack against Iran on June 13.Amid the conflict with Israel which has currently settled into an uneasy c
Iran is reportedly preparing to mine the Strait of Hormuz, a move that would spike global oil prices and give a significant boost to the Russian economy and its war machine in Ukraine.
Reuters reported on July 1 that Iran loaded naval mines onto vessels in the Persian Gulf last month, citing two U.S. officials, who said the preparations had been detected after Israel launched its "preemptive" attack against Iran on June 13.
Amid the conflict with Israel which has currently settled into an uneasy ceasefire, Iran has repeatedly threatened to block the Strait of Hormuz as a means of deterrence.
If the Strait were mined, Iran could block one-fifth of global oil demand and spike world energy prices — a boon for Russia's oil-dependent economy.
"Any disruption to Gulf supplies would push up global crude prices. Prices for Russian crude would rise in line," John Gawthrop, Argus Eurasia Energy editor, told the Kyiv Independent.
Russia’s energy sector made up 35-40% of its budget revenues pre-full-scale invasion and is powering its war machine.
Western sanctions on Russian energy and the G7’s Russian oil price cap of $60 per barrel have hampered its profits, with Russia losing more than $150 billion over the last three years, but have yet to deal a crippling blow.
The conflict between Israel and Iran caused a spike in prices — Brent crude, the global benchmark, on June 13 jumped from $69.36 to $75 per barrel, a surge that looked like it could grant Russia's economy a reprieve.
Until the Israeli attacks, the future for Russian crude wasn’t looking so bright. Europe was planning its 18th sanctions package targeting Russia's energy sector, and the G7 was pushing for a $45 price cap. Hungary and Slovakia have since blocked the sanctions package.
Prices have since settled along with the conflict and on July 2 Brent crude was $67.50, but if Iran does go ahead with mining the Strait of Hormuz, blocking one-fifth of global oil demand, another surge would follow.
This would also mean Iran blocks its own oil exports too, so it would only be a last resort from Tehran, David Fyfe, chief economist at Argus Media, a market analyst group, told the Kyiv Independent last month.
Editor's note: The article was updated with a statement from Ukraine's military intelligence agency.A tanker carrying 1 million barrels of oil experienced an explosion near Libya, its operator, TMS Tankers, said on June 30. The vessel, Vilamoura, is now being towed to Greece, where the extent of the damage will be assessed upon arrival. The blast caused the engine room to flood due to water intake, though the cause of the explosion remains unclear, according to a company spokesperson.The spokesp
Editor's note: The article was updated with a statement from Ukraine's military intelligence agency.
A tanker carrying 1 million barrels of oil experienced an explosion near Libya, its operator, TMS Tankers, said on June 30. The vessel, Vilamoura, is now being towed to Greece, where the extent of the damage will be assessed upon arrival.
The blast caused the engine room to flood due to water intake, though the cause of the explosion remains unclear, according to a company spokesperson.
The spokesperson confirmed that the crew is safe and no pollution has been reported.
The explosion occurred on June 27 as the vessel was departing the Libyan port of Zuwetina, some 150 kilometers (90 miles) northeast of Libyan territorial waters, Ukraine's military intelligence reported.
The incident comes amid a series of unexplained blasts targeting oil tankers that had previously visited Russian ports. In response, shipowners have started inspecting their vessels for mines using divers and underwater drones.
Vilamoura had visited Russian oil terminals twice since April, loading Kazakh-origin crude rather than Russian oil. According to Bloomberg vessel-tracking data, the tanker called at the Russian port of Ust-Luga in early April and at the Caspian Pipeline Consortium (CPC) terminal near Novorossiysk in May. Both terminals primarily handle Kazakh crude exports.
Maritime risk consultancy Vanguard Tech reported that four other vessels have been damaged by explosions since the beginning of the year. Each had recently docked at Russian ports, the firm said.
Ukraine has targeted Russian energy assets throughout the full-scale invasion, including a drone strike in February on the CPC pipeline, a route responsible for moving roughly 80% of Kazakhstan’s oil exports.
President Volodymyr Zelensky has instructed government officials to prepare a decision introducing a long-term moratorium on business inspections in Ukraine, the Presidential Office announced on June 27. Zelensky discussed the moratorium during an address at the "State and Business Forum: From Dialogue to Partnership," held in Kyiv. "I have instructed that a decision on a long-term moratorium on business inspections be prepared to protect businesses from any pressure by unscrupulous individuals
President Volodymyr Zelensky has instructed government officials to prepare a decision introducing a long-term moratorium on business inspections in Ukraine, the Presidential Office announced on June 27.
Zelensky discussed the moratorium during an address at the "State and Business Forum: From Dialogue to Partnership," held in Kyiv.
"I have instructed that a decision on a long-term moratorium on business inspections be prepared to protect businesses from any pressure by unscrupulous individuals in various government positions," he said.
Economic growth is a vital component of Ukrainian resilience, necessitating ongoing dialogue between the government and entrepreneurs, Zelensky said. In addition to imposing the moratorium on inspections, Kyiv will also expand the Council for Entrepreneurship Support in an effort to cultivate entrepreneurship in Ukraine.
"Even under such harsh conditions of this war, Ukraine can rely on its entrepreneurs — on our domestic Ukrainian manufacturing, our Ukrainian logistics, our Ukrainian services across all sectors — from security to everyday life, as well as on Ukrainian developments and investments," the president said.
Following Russia's full-scale invasion in early 2022 and the onset of martial law, Ukraine temporarily suspended certain business regulations, including tax inspections for businesses. Zelensky signed a law resuming tax inspections for certain businesses in December 2023.
Now in its fourth year of full-scale war against Russia, Ukraine's economy is still attempting to recover from the massive blow dealt in 2022, when the GDP dropped by 29.1%. At the same forum on June 27, Ukraine's new Prosecutor General Ruslan Kravchenko announced another measure meant to boost business: an audit of criminal cases related to businesses in Ukraine.
"The second priority is to finally sort out the proceedings related to business, protect business, and achieve justice in these matters," Kravchenko said.
The Prosecutor's Office will be dedicated to "ensuring the rights of investors and businesses," Kravchenko wrote on his Telegram channel on June 26. Efforts to safeguard businesses will not interfere with Ukraine's legal obligations and the regulatory reforms required for its integration into the European Union, he said.
President Vladimir Putin claimed on June 20 that Russia's economy is strong despite war and sanctions, brushing off mounting warnings from his own officials about stagnation and looming recession.Speaking at the St. Petersburg International Economic Forum, Putin was asked about reports that the ongoing war in Ukraine was "killing" the Russian economy."Rumors of my death are greatly exaggerated," he replied, quoting American writer Mark Twain.The president claimed that Russia has outpaced global
President Vladimir Putin claimed on June 20 that Russia's economy is strong despite war and sanctions, brushing off mounting warnings from his own officials about stagnation and looming recession.
Speaking at the St. Petersburg International Economic Forum, Putin was asked about reports that the ongoing war in Ukraine was "killing" the Russian economy.
"Rumors of my death are greatly exaggerated," he replied, quoting American writer Mark Twain.
The president claimed that Russia has outpaced global economic growth over the past two years, allegedly expanding by over 4% annually.
"Our most important task is to ensure the economy's transition to a balanced growth trajectory," Putin said. "At the same time, some specialists and experts point to the risks of stagnation and even recession. This should not be allowed under any circumstances."
The statement came just a day after Central Bank Governor Elvira Nabiullina warned on that Russia's wartime economic momentum is fading fast. She said the economy is approaching the limits of its growth potential, adding that previously effective tools are now exhausted.
Economy Minister Maxim Reshetnikov echoed the concerns, telling a separate forum audience on June 19 that Russia is "on the verge of a transition to recession." He emphasized that recession is not inevitable and that "everything depends on our decisions."
Moscow has experienced rapid inflation and historically high interest rates amid its full-scale invasion of Ukraine. The central bank raised rates repeatedly to combat inflation, but on June 6, it made its first cut in nearly two years, from 21% to 20%.
Putin has criticized the central bank's tight monetary policy for choking off private investment, especially in non-defense sectors.
Despite Putin's optimistic rhetoric, analysts attribute Russia's economic slowdown to sustained international sanctions, falling oil prices, rising wartime spending, and supply disruptions.
Russia's ever-mounting losses on the battlefield which recently passed the 1 million mark are also likely contrbuting to the economic turmoil as the Kremlin is having to pay people to sign up to fight rather than introduce what would be a hugely unpopular mass mobilization.
According to an analysis by economist Janis Kluge, Russia's daily bill just for sign-up bonuses is $24 million.
Editor's note: This story was updated to include Russian President Vladimir Putin's remarks at the St. Petersburg International Economic Forum. Russia's wartime economic momentum is fading fast, with key resources nearly exhausted, Russian Central Bank Governor Elvira Nabiullina said, warning that the country can no longer rely on the same tools that sustained growth in the first two years of the full-scale war against Ukraine, the Moscow Times reported on June 19.Speaking at the St. Petersburg
Editor's note: This story was updated to include Russian President Vladimir Putin's remarks at the St. Petersburg International Economic Forum.
Russia's wartime economic momentum is fading fast, with key resources nearly exhausted, Russian Central Bank Governor Elvira Nabiullina said, warning that the country can no longer rely on the same tools that sustained growth in the first two years of the full-scale war against Ukraine, the Moscow Times reported on June 19.
Speaking at the St. Petersburg International Economic Forum, Nabiullina said that the Russian economy had been expanding on the back of "free resources," including labor, industrial capacity, bank capital reserves, and liquid assets from the National Wealth Fund (NWF) — all of which are now reportedly nearing depletion.
"We grew for two years at a fairly high pace because free resources were activated," she said. "We need to understand that many of those resources have truly been exhausted."
Speaking at the same forum, Russian President Vladimir Putin ordered officials "not to allow stagnation or recession" in the Russian economy under any circumstances.
"We must consistently change the structure of our economy," he said.
The comments come after Russia's ambassador to the U.K., Andrei Kelin, claimed in an interview with CNN this week that Russia is spending "only 5–7%" of its federal budget on the war. Kelin claimed that Russia can continue waging its war, saying Moscow "is winning."
According to the state statistics agency Rosstat, Russia's unemployment rate has dropped to a historic low of 2.3%. At the same time, mass emigration and large-scale wartime recruitment have created a labor shortage estimated at 2 million people. Industrial capacity utilization has surged beyond 80%, the highest in modern Russian history.
Russia's economy is now "on the verge of a transition to recession," Russian Economy Minister Maxim Reshetnikov said at the same forum. Official data show that GDP growth slowed from 4.1% in late 2023 to just 1.4% in the first quarter of 2024, with the economy contracting quarter-on-quarter for the first time since 2022.
Business profits in March fell by one-third overall and dropped by half in the critical oil and gas sector. Industrial growth stagnated at 1.2% year-over-year between January and April, while civilian sectors of the economy began shrinking. Retail turnover growth slowed from 7.2% in December to just 2.4% in April.
An anonymous Russian analyst told Novaya Gazeta Europe that government technocrats are effectively telling Putin it's time to choose between "war or economy."
During its invasion of Ukraine, Russia has faced rising inflation due to record military spending, pushing the central bank to maintain high interest rates. Under government pressure, the bank cut the rate slightly from 21% to 20% earlier in June, despite concerns about weakened private investment.
Officials have scaled back key development projects and reduced shipments of metals and oil products. Early hopes for recovery in 2025, driven by talks with the U.S., have faded as inflation and sanctions weigh heavily on growth.
The Russian economy appears to be "on the verge of a transition to recession," Russian Economy Minister Maxim Reshetnikov said on June 19, adding that the next step will be decisive.The comments underscore Russia's mounting economic challenges as it continues its all-out war against Ukraine."According to figures, we have a cooling stage (in the economy). But all our numbers are like a rearview mirror," Reshetnikov said at the St. Petersburg International Economic Forum when asked about Russia's
The Russian economy appears to be "on the verge of a transition to recession," Russian Economy Minister Maxim Reshetnikov said on June 19, adding that the next step will be decisive.
The comments underscore Russia's mounting economic challenges as it continues its all-out war against Ukraine.
"According to figures, we have a cooling stage (in the economy). But all our numbers are like a rearview mirror," Reshetnikov said at the St. Petersburg International Economic Forum when asked about Russia's economic situation.
"According to current business perceptions, we are already, it seems, on the verge of a transition to a recession," the minister added. Reshetnikov clarified that recession is not inevitable and that "everything depends on our decisions."
Russia has faced soaring inflation during its invasion of Ukraine, driven by record wartime spending. This forced the central bank to set one of the highest key interest rates in decades, hurting private investments in non-defense-related sectors.
Facing government pressure, the central bank slashed the interest rate from 21% to 20% earlier this month.
Reshetnikov himself urged the central bank to cut rates in order to boost growth, aiming to achieve a 3% growth target set by Russian President Vladimir Putin.
Russia has been forced to slash key projects across various sectors in the face of an economic slowdown, brought on in part by plummeting oil prices. Major Russian exporters have also cut down on rail shipments of metals and oil products, even beyond earlier projected reductions.
After some positive signals earlier in 2025 due to U.S. President Donald Trump's outreach to Moscow and hopes for a ceasefire, more recent reports again indicate a sharp slowdown in Russia's economic growth.
Analysts have connected this development to the central bank policies, sanctions, low oil prices, supply difficulties, and high inflation.
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