The Russian economy showed minimal growth in the third quarter, with official data revealing a mere 0.3% increase in GDP compared to the previous quarter. This tepid expansion is largely attributed to the ongoing war in Ukraine, which has necessitated significant military spending. However, this increased expenditure has not translated into sustained economic growth, as it has triggered a rise in inflation, now hovering around 14% year-on-year.
Economists warn that the military budget, which has been expanding at an alarming rate, is now becoming a drag on the economy. The war’s financial burden has led to a misallocation of resources, diverting funds from other critical sectors such as healthcare and infrastructure. This shift has not only inflated prices for everyday goods but has also stifled consumer spending, which is a vital component of economic growth.
Analysts suggest that while the initial phase of the conflict saw a temporary boost in certain industries, such as defense and energy, the long-term impact is now becoming apparent. The Russian Central Bank has been struggling to maintain stable inflation rates, and recent monetary policy adjustments have had limited success in curbing the rising cost of living. As the war continues, the economic strain is expected to intensify, raising concerns about the sustainability of the current growth model.