Kathrine Frich
Russia’s economy has entered what analysts describe as a dangerous phase of long-term decline.
There is little prospect of a return to stable growth even if the war in Ukraine were to end.
An abrupt collapse
A report cited by The Economist argues that the country is drifting into a so-called “death zone” where resources are depleted faster than they can be restored.
According to the publication, the threat is not an abrupt collapse but a slow erosion of economic foundations. While the system continues to function on the surface, structural weaknesses are deepening.
The report suggests that even a ceasefire would not automatically reverse the damage, as the current model is heavily shaped by militarization and rising debt.
Mounting pressures
Russia’s budget deficit has reached 5.6 trillion rubles, its highest level since the Covid-19 pandemic.
Interest payments on public debt now exceed total government spending on education and healthcare.
Energy revenues, long a pillar of state finances, are also under strain. Russian crude is trading at a discount of 25 to 30 percent compared with Brent, cutting into export income.
In January, revenues from the oil and gas sector fell by nearly half, adding further pressure to public finances.
Limited options
Experts cited in the report argue that stabilising the economy would require a combination of favourable developments, including sanctions relief and significant restructuring of domestic markets.
Such a scenario is viewed as highly unlikely. Prolonging the conflict, analysts warn, raises the risk of financial instability and institutional strain.
While Russia retains the capacity to sustain its war effort for now, the broader economic model shows signs of fatigue.
The central question, the report concludes, is not growth but how long the system can endure.
Sources: The Economist, LA.LV.
