Russia’s Wartime Economy Faces Debt, Spending Strain

Russia’s wartime economy is showing growing strain as heavy military spending widens the budget deficit, slows growth and undermines consumer and business confidence. Economists say the country does not face an imminent financial crisis because strong oil revenues, low unemployment and government support for poorer regions continue to finance the war and limit public discontent. However, the deficit had reached about 2.8% of GDP by the end of July while remaining reserves stood near 1.6% of GDP, increasing reliance on costly domestic borrowing. Growth has slowed from more than 4% in 2023-24 to a government forecast of 0.6% this year, while the Levada Center’s consumer sentiment index fell to 94 from 116 in 2025. Higher gasoline prices and fuel shortages following Ukrainian drone strikes on refineries, along with losses suffered by small businesses, have added to public concerns. Economists warn that these accumulating weaknesses could eventually produce a serious crisis even as the Kremlin projects stability during its parliamentary election.