The Russian economy is finally stagnating. What does it mean for the war – and for Putin?
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After initial sanctions following the 2022 invasion of Ukraine, the Russian economy experienced a boom driven by increased military spending, becoming the world's ninth largest economy by 2025. However, in 2026, signs of stagnation have emerged due to falling oil prices, a key revenue source, and demographic pressures. This slowdown has led to tax hikes for ordinary Russians and a reallocation of state funding towards military spending, impacting welfare, education, and healthcare. Trade with allies has become less robust, corporate bankruptcies are increasing, and labor shortages are severe. The IMF has downgraded Russia's growth forecasts to 0.6% in 2025 and 0.8% in 2026, the lowest since the 2014 Crimea annexation recession. The impact of this economic malaise on the conflict in Ukraine depends on Russia's macroeconomic strategies and global oil prices.
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