Russia’s economy has reportedly come to a halt. Experts from the Institute of National Economic Forecasting (INEF) of the Russian Academy of Sciences conclude that the country’s GDP growth is stagnating, The Moscow Times reported on September 16.
According to the institute’s latest update, Russian GDP growth in the second quarter of 2025 showed a flat 0%, following a 0.6% contraction in the first quarter. While the Russian government reported a slight increase of 1.5% in Q2 GDP when adjusted for seasonality, experts argue that this does not significantly change the overall picture of stagnation.
The debate over whether Russia is officially in a recession has been ongoing for months. While some argue that the country is undergoing a “technical stagnation,” others, including economist Sergey Alexashenko, argue that even a marginal 0.1% or 1% growth is still indicative of stagnation, The Mocow Times writes.
The Russian economy has essentially split into two sectors: a growing military sector and a struggling civilian sector. While military spending is on the rise, supported by significant government financing, the civilian industries are struggling. Central Bank policies, including a high key interest rate, are further straining non-state sectors.
The Centre for Macroeconomic Analysis and Short-Term Forecasting (CMAST) reported that civil industries have been stagnant since mid-2023 and are now experiencing a sharp decline.
The decline is most evident in the real sector, where production and financial stability are deteriorating, according to INEF experts. The trend is compounded by weak investment in the second half of 2025, which is expected to drag the economy further down.
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This trend is confirmed by the Central Bank’s monitoring, which showed a sharp decline in financial flows in July, marking the largest drop since the pandemic, according to The Moscow Times.
While exports and consumer demand are also declining, the government’s ability to stimulate the economy through high spending is limited, according to INEF. With low oil prices, a strong ruble, and a stagnant economy, maintaining high spending rates will require a budget deficit of over 5 trillion rubles (60.3$ billion) in 2025.
Any slowdown in government spending is expected to further worsen the economic situation in the second half of the year.
The Moscow Times concludes that Russia’s economy faces an uphill battle in the coming months, as both the military and civilian sectors show signs of strain, and the government’s ability to support growth is severely constrained.
The forecast for 2025’s growth is modest at best, with predictions of about 1% growth, and a potential contraction of up to 0.3 percentage points in GDP due to shrinking inventories and lower consumer demand.
Previously, Ukrainian President Volodymyr Zelenskyy said that Russia’s war against Ukraine cannot be stopped by negotiations or partial concessions, but only by exhausting the economic and military resources that enable it.
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