Russia's wartime economy faces long-term erosion from debt and military spending

Russia’s wartime economy is experiencing growing friction as massive military spending increases the budget deficit and slows economic growth. While economists note that an imminent financial collapse is not signaled—largely due to high oil export revenues driven by the Iran war—long-term structural issues are emerging.

Economic growth has slowed from a peak of over 4% in 2023-24, with the government forecasting only 0.6% for this year. Consumer sentiment has also declined; the Levada Center reported the consumer sentiment index fell to 94 over the summer, down from 116 in early 2025. This decline follows rising gasoline prices and fuel shortages caused by Ukrainian drone attacks on refineries.

Additionally, small businesses have faced challenges including inventory losses and customer strikes against online retailers Wildberries and Ozon. Despite these pressures, low unemployment and government spending in impoverished regions have helped maintain a level of stability during the ongoing parliamentary elections.