No optimistic outlook for Russian economy

I also remind you that the Russian economy is highly sensitive to oil prices, with export revenues from oil making up to 30% of the Russian budget.

Official statistics report victories.

In 2024, the Russian economy showed growth, exceeding experts’ expectations.

According to official sources, Russia’s GDP grew by 4.1%.

This happened "thanks to increased investments, consumer demand, and growth in real incomes of the population."

This is what the official sources say.

But what’s really happening there can be seen from the news of regional national media.

A small selection of the "successful success" of the Russian economy.

Economy

1. In the first quarter of 2025, Russia’s GDP declined for the first time since 2022: a contraction of 0.3% compared to the previous quarter, with Bloomberg Economics estimating a decline of 0.6-0.8%.
2. This decline is accompanied by a slowdown in industrial growth (from 5.7% to 1.1%), a drop in retail turnover (to 3.2%), and a fall in wholesale trade into negative territory (–2.1%). Everything is going according to plan.
3. “If we look at the dynamics of industrial production excluding defense industry sectors, we can talk about a transition into recession,” states the report of the Russian Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF) for the first quarter of 2025.
4. The Russian budget for 2025 was based on an oil price of $70 per barrel, with $60 considered the critical level.
5. Currently, Brent crude oil has fallen below $60 per barrel, while Russian Urals crude oil is below $50.
6. Russia’s budget deficit for the first four months of 2025 nearly tripled compared to last year, reaching 3.2 trillion rubles. In April, the monthly deficit was 1.05 trillion rubles ($13 billion). The main cause of Russia’s economic problems is the sharp decline in oil and gas revenues, alongside rising war expenses. Russian Urals crude oil fell from $70 in January to $49 in early May, leading to a loss of 2.6 trillion rubles in budget revenues. In addition, OPEC+ plans to increase production in July, which will likely continue the drop in oil prices.
7. Civilian production output fell by 0.8% in the first quarter. As a result, production reached its lowest level since April 2023.
8. The industrial PMI dropped below 50 points, signaling a contraction in production. Freight transportation across the Russian Railways network decreased by 9.7% year-on-year.
9. FT commentator Martin Sandbu wrote on January 12, 2025, that due to growing corporate debt, "Russia’s war economy is a house of cards."
10. In April, the Russian Ministry of Finance announced it expects oil and gas revenues to fall 24% this year compared to earlier estimates and lowered the oil price forecast from $69.7 to $56 per barrel. The ministry also raised the 2025 budget deficit forecast to 1.7% of GDP from the previous 0.5%.

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Population and standard of living

1. The Russian Ministry of Economic Development raised its consumer price growth forecast for April 2025 from 4.5% to 7.6%. Weekly inflation started rising again despite a strong ruble. The national currency is expected to weaken in summer, increasing inflationary pressure.
2. The Bank of Russia also raised its inflation forecast: 7-8% by the end of 2025, with an average annual rate possibly reaching 9.1-9.8%.
3. Price increases are linked to sanctions, import restrictions, and a reduction of legal channels for bringing in cars, electronics, spare parts, and household appliances, causing additional price hikes. (Sanctions don’t work!)
4. Analysts predict real incomes of Russians will fall by 2% in 2025 (likely much more in reality).
5. Personal bankruptcies in Russia have risen by 35%.
6. Food prices in Russia in 2025 may increase by 20%.
7. Actual inflation, according to expert estimates, may reach 15–21% annually, leading to a decline in living standards and reduced purchasing power.
8. Russia faces a growing labor shortage, nearing 3 million people.
9. The number of mortgage loans issued in March 2025 halved compared to March 2024.
10. Consumer activity is declining. Retail sales growth is over three times slower than income growth. “Real incomes, adjusted for inflation, increased by 7.1%, while retail sales rose only 2.2%.”
11. Real interest rates on long-term loans reach 40%.

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Business

1. Sanctions have already affected 70% of Russian businesses.
2. 77% of large Russian companies cite the prolonged high key interest rate as their top threat.
3. Gazprom ended 2024 with a net loss of 1.07 trillion rubles ($12.89 billion).
4. 86.6% of businesses report steadily rising procurement costs.
5. Since January 2025, companies pay an increased profit tax rate of 25% instead of 20%.
6. Russia’s major chip manufacturer, Angstrom (Zelenograd), has entered bankruptcy.
7. State corporation Rosnano declared a technical default on state-guaranteed bonds.
8. At the start of 2025, over 20% of enterprises in Russia’s manufacturing sector have a risky profit-to-interest payment ratio, with the transport machinery industry in the worst condition.

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This is a brief overview of what’s visible on the surface.

In reality, Russia’s economy has begun facing serious structural problems from which it will not recover, even if it abruptly freezes its military campaign.

British intelligence says the Russian economy will collapse in 2025.

Putin understands this, which is why he is escalating, throwing his last resources into a “summer offensive campaign.”

This is the final convulsion of a dying empire.

Today, it is practically impossible to find optimistic forecasts about the Russian economy.

Source

About the author. Anatoliy Amelin, co-founder and director of economic programs at the Ukrainian Institute for the Future.

The editorial team does not always share the opinions expressed by blog or column authors.