Gross domestic product (GDP) only grew by 1.4% in the first quarter of 2025 – a notable decline from 4.5% growth in the previous quarter and 5.4% in the same period last year, the Moscow Times reported, citing Rosstat data.
The latest data from Rosstat came in below expectations: the Russian Economic Development Ministry estimated GDP growth at 1.7% and Bloomberg analysts predicted 1.8% growth.
I’d have expected it to crash already a few years ago! Why is it only slowing down?
Because the economy of a country with 140 million people is a massive system.
This is that state economy crashing, and the reason it’s taking time is that Russia had prepared for this, and had a giant war chest to sustain sanctions and the extra cost of war. Plus Russia has been very skillful in pulling all sorts of economic tricks to postpone the crash.
You could say the Russian economy already is collapsing, it just seems a bit like Wile E. Coyote running off a cliff and hanging midair for a moment.
But Russia has exhausted all their reserves on many levels, industries are closing, tax revenues are dropping like a rock, Banks, and the oil/gas industry is running at deficits, even the military complex is running at deficits because they are required to sell below cost to the government. Everything is worn down because Russia lacks the resources to maintain productivity, and repairs and maintenance of equipment and infrastructure is insufficient because of lack of resources.
It’s all crumbling slowly, except when one key part finally collapses for real, everything else goes with it very quickly.Putin knows he is going down, and he has decided to take Russia down with him.
He does not know he’s going down, they always think they’re God’s Chosen till they hear the knock at the bunker.
War economies are weird, to say the least.
They usually crash when trying to return to normalcy. That’s why Putin doesn’t want peace at reasonable terms: Because if he doesn’t have a total and complete victory, it’s going to be hard to distract from the complete and total collapse. The longer this goes on, the worse the fall will be, but he doesn’t have much of a choice.
This is (one of the reasons) why I hope sanctions remain in place even after a peace deal.
I’d hope the sanctions will remain in place as long as Russia occupies Ukraine.
Cause they’re lying through their teeth and economic collapse is very slow. For soviet union it took decades.
Spending lots of the money you have saved up in your sovereign wealth fund is a good way to keep your economy afloat. Can also just do what the WW1-2 powers did and just borrow a lot if necessary, assuming there are people you can borrow from.
Does growth not account for this though? In my mind, spending saved up money or borrowing from others, does not represent economic growth
GDP is basically a measure of how much work is getting done. So, if you save your money, you’re not contributing to it. The moment you spend some, that spent money goes into the calculation.
Whether this constitutes any kind of real “growth” or not in your economy is a different topic. There are already debates on how useful GDP is as a useable measurement.
Keynes’s digging holes, IRL.
There’s still growth?
They are spending shitloads of money on weapons that immediately get blown up, this pushes up GDP figures. What doesn’t go up is productive work/investments that further the interest of the people of the nation, investments that would continue to reap rewards in the future.
Obviously this isn’t to say that all military spending is bad, far from it, but Russia is dumping piles money into a war they started and never needed to happen. They aren’t defending themselves from some threat, they are simply burning money and resources.
I think the key to understanding the context is that GDP is a flow, not any kind of accumulation.
If Person A earns $100,000 this year, gets a 4% raise every year, will they be richer or poorer than Person B who earns $120,000 and gets a 5% raise every year, after 10 years? We have no idea, because we don’t know from the question what their starting wealth was, how much they save or spend, whether the stuff they buy retains its value or appreciates or depreciates, etc.
So Russia can have growing GDP, but can still be running its economy into the ground if the stuff they’re producing is getting destroyed, or has no lasting value.
