- cross-posted to:
- world@quokk.au
- worldnews@midwest.social
- cross-posted to:
- world@quokk.au
- worldnews@midwest.social
[…]
Russia’s economy is experiencing a sharp slowdown in growth, according to a report released by the governmental statistics agency Rosstat on May 16.
Gross domestic product (GDP) only grew by 1.4% in the first quarter of 2025 – a notable decline from 4.5% growth in the previous quarter and 5.4% in the same period last year, the Moscow Times reported, citing Rosstat data.
The latest data from Rosstat came in below expectations: the Russian Economic Development Ministry estimated GDP growth at 1.7% and Bloomberg analysts predicted 1.8% growth.
According to Egor Susin, an executive from Gazprombank (the third largest bank in Russia, currently under sanctions), Rosstat’s data show a “sharp slowdown in the economy.”
[…]
Some aalysts point to Central Bank policies, sanctions, supply difficulties, and high inflation as reasons for the economy’s decline.
Moreover, “the situation is complicated by low oil prices,” Raiffeisenbank analysts note, as oil and gas revenues fell 10% from January to April.
A recent report from the Stockholm Institute of Transition Economics (SITE) also revealed that, despite narratives from the Kremlin, Russia’s economy is under increasing strain from its war in Ukraine and Western sanctions.
A recent Reuters calculation sees Russia’s oil and gas revenue -the most important source of cash for the Kremlin, accounting for about a quarter of total federal budget proceeds- falling by a third in May 2025 from a year earlier to 0.52 trillion roubles ($6.48 billion), the lowest level since July 2023 amid weaker oil prices and a stronger rouble.
As Moscow and Kyiv discuss potential peace deals, the Russian economy may face another shock if military spending is reduced. Conversely – if peace talks fail – Europe and the United States may impose additional sanctions on Russia, putting further strain on its economy.
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War Economies are weird. The only reason why the numbers are that high is because of all the military spending. Transitioning to peace time will cause russian economic collapse.
War economies usually crash when trying to return to normalcy. That’s why Putin doesn’t want peace at reasonable terms: Because if he doesn’t have a total and complete victory, it’s going to be hard to distract from the complete and total collapse. The longer this goes on, the worse the fall will be, but he doesn’t have much of a choice.
This is (one of the reasons) why I hope sanctions remain in place even after a peace deal - Because there will be one obvious person that can be thrown under the bus, and I’m sure most russians secretly want to see the main defenestrator defenestrated.
That is also why the frozen Russian assets are so important. If they are given to Russia, it would be rather easy to make that transition.
Russia’s economy is experiencing a sharp slowdown in growth, according to a report released by the governmental statistics agency Rosstat on May 16.
Sharp slowdown according to governmental statistics agency
And we know they sugarcoat the numbers in every way they can! Imagine how bad it really is!Compared to last quarter, the economy has already contracted 0.4%
I’ve already estimated here that the real GDP excluding military has probably shrunk by about 10 maybe even 15% in 2024, and it’s still dropping! Rough times are here for Russia.
Yes, and many economists (inside and outside Russia) estimate that there will be no real GDP growth this year, maybe not even a nominal growth. Russia’s National Wealth Fund -which has been used to cover up the country’s budget deficit from 2022-2024- could run out of cash by the end of 2025: the NWF’s liquid portion stood at 32% at the end of 2024, down from 42% in 2023, and 58% in 2022.
In 2025, military spending is likely to exceed oil and gas revenues for the first time in Russia’s history. In the 2000s, for example, military spending reached 30-35% of oil and gas revenue.
[Edit typo.]
not even a nominal growth.
That’s equivalent to a decline equal to inflation, which is about 20%!
The core inflation in Russia is ~10%, but that’s bad enough, especially given the state of the economy. (And prices increases for food in Russia a even far higher than 20%.)
The core inflation in Russia is ~10%
AFAIK the official inflation is 9-10% The real inflation is closer to 20%.
“Russia claims inflation is 9-10%. Why would they then have a policy rate of 21% at the central bank? Which regular central bank would have a policy rate that’s basically 11.50 percentage points higher than the inflation rate? If any of our central banks were doing something like that, they would be out of their job the next day,” Becker told reporters.
So all we know is that we can’t trust the official number, and the real rate is clearly higher.
The official inflation rate in Russia is 10.2% for April 2025 (year-on-year). But, yeah, I don’t trust all their numbers either …
“Russia claims inflation is 9-10%. Why would they then have a policy rate of 21% at the central bank? Which regular central bank would have a policy rate that’s basically 11.50 percentage points higher than the inflation rate? If any of our central banks were doing something like that, they would be out of their job the next day,” Becker told reporters.
So all we know is that we can’t trust the official number, and the real rate is clearly higher.
So all we know is that we can’t trust the official number, and the real rate is clearly higher.
I fully agree.
In 2025, military spending is likely to exceed oil and gas revenues
And the oil and gas is barely profitable now because of lower prices. I bet expenses have increased too.
Tja
?
Good! They’ve earned it.
As it turn out sanctions do have an affect, but it just takes time
Fuckem.
Inflation, devaluation, reduced incomes: Russia’s economy in an era of falling oil prices - [April 2025]
Russia’s oil and gas revenues have already fallen by 10% — and that may be just the beginning. Oil prices are sliding amid fears of a global economic slowdown triggered by the US-China tariff war, along with rising production from OPEC+ countries. Goldman Sachs warns that in a worst-case scenario, oil could plunge to $40 a barrel by 2026. Even the bank’s more moderate forecast isn’t much better: $55 a barrel. For Russia, that could mean: at best; another round of inflation and ruble devaluation; and at worst, a banking crisis and industrial shock.
In response to the decline in oil revenues, the authorities may also choose to cut spending. The Russian government has its own unique methods for doing this, as Mikhaylova points out: shifting the state’s responsibilities onto businesses. “This is already happening. For example, large enterprises — whether state-owned, municipal, or private — are being forced to hire those who are going to war as mercenaries, paying them salaries from company funds,” [one expert] explains. If budget revenues continue to fall, this will likely become more common.
According to [another expert], all of these measures lead to inflation, and if oil prices stay low for an extended period, Russia will face a real crisis: “It’s unlikely we’ll see empty store shelves like in the late Soviet Union, or widespread wage non-payments like in the early '90s. Since the government prints money and the macroeconomic team is fairly pragmatic, we’re more likely to follow in the footsteps of Argentina and Turkey — maintaining a market economy, but one that’s growing increasingly poorer.”
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