Analysts have noted that Russia’s third-quarter economic performance has been muted, with growth figures barely surpassing the 1.5% threshold. This marginal increase appears to be driven largely by state-backed military expenditures, which have provided a temporary boost to industrial and defense sectors. However, the long-term consequences of this spending pattern are becoming increasingly apparent. Inflation rates, which had previously been controlled, are now climbing, and this has started to dampen consumer spending and business investment.
Industry experts indicate that the war-related spending has created a paradoxical situation: while it has sustained certain parts of the economy, the associated cost pressures are now challenging the overall stability of the Russian currency and consumer purchasing power. The Central Bank of Russia has struggled to keep up with the inflationary pressures, leading to a depreciation of the ruble and a rise in the cost of imported goods. This situation is expected to continue, with many economists warning that the current trajectory could lead to a more pronounced economic downturn by the end of the year.
Russian officials have maintained that the military budget is necessary for national security, but the economic consequences are difficult to ignore. As global markets remain under pressure from sanctions and geopolitical tensions, the Russian government faces a dilemma: continuing to prioritize defense spending at the expense of economic health or seeking alternative measures to stabilize the economy.