The Russian economy recorded minimal growth in the third quarter of 2023, with bloated military spending initially contributing to economic activity but now creating inflationary pressures that are undermining growth. According to official data released by the Russian government, the country’s gross domestic product (GDP) expanded by just 0.2% compared to the previous quarter, a stark contrast to the strong performance seen in early 2022 when the economy showed resilience despite Western sanctions. The slowdown is attributed to the ongoing war in Ukraine, which has led to significant military spending that has diverted resources from other sectors of the economy.
Inflation, which has been rising steadily in Russia, now places additional pressure on economic growth. The country’s central bank has warned that inflation will likely remain elevated for the foreseeable future, which could lead to higher interest rates and reduced consumer spending. This is putting further strain on a domestic market that is already facing energy supply challenges and a shrinking industrial base. Despite these challenges, the Russian government continues to prioritize military spending, citing the need to maintain national security and deter potential threats.