The Government Has Stated That Economic Growth In Russia Has Come To An Almost Complete Halt

Putin has a confession of failure.

The military boom that the Russian economy experienced in 2023-24 has finally come to an end. In July 2025, the country's economic growth has practically stopped: its rate amounted to 0.4% year-on-year, the Russian Ministry of Economic Development reported on Wednesday, The Moscow Times wrote.

The economy slowed 2.5 times compared to June (1%), and 11 times compared to last December (4.5%).

Industry was on the verge of stagnation - with 0.7% growth. And the sectors that were booming last year have slipped into a deep recession. Production of clothing collapsed by 7%, furniture - by 12%, electrical equipment - by 6.5%. The decline in metallurgy accelerated to 10.2%.

Food production fell by 1.1% in January-July, freight transportation fell by 1.5%. Even in the military-industrial complex industries (the production of "fabricated metal products" and the manufacture of "computers, electronics and optics"), growth rates fell 3.5-5 times.

"The economy is obviously starting to suffer because of the imbalances that have built up over the war," said Liam Peach, senior emerging markets economist at Capital Economics. The more than 20 trillion rubles that the government handed out to the military, contract workers and defense plants created an illusion of wealth. But payback has come in the form of surging inflation, rising interest rates and mounting business problems.

The economy is now "teetering on the brink of recession," says Tatiana Orlova, senior emerging markets economist at Oxford Economiсs. If the Kremlin decides to prolong the war, "additional tough sanctions," likely targeting the energy sector, could trigger an economic slowdown, she said.

The Ministry of Economic Development, which initially expected GDP growth of 2.5 percent this year, lowered its forecast to 1.5 percent. The IMF predicts the Russian economy to slow down to 0.9% from 4.3% a year earlier, while economists polled by the Higher School of Economics predicted a slowdown to 1.2%. The Central Bank forecasts growth of 1-2% this year and only 0.5-1.5% next year.

The surplus of funds used to stimulate the economy is drying up, economist Vladislav Inozemtsev states. To further support the military industry, the authorities will have to raise taxes and withdraw resources from civilian sectors, which will hamper growth, he explains.

"The economy can and most likely will decline in 2025," Inozemtsev told The Moscow Times. - There were no real reasons for growth, even at the beginning of the year."

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