The Russian economy moved into an unmistakable period of decline in 2025: businesses lost money, the treasury remained solvent only by raising taxes, and inflation was brought under control only thanks to high central bank interest rates. At the same time, the year resolved a few key contradictions. Unlike in 2024, when The Insider described Russian inflation as “embarrassingly high for a country with a strong budget,” 2025 saw a noticeably weaker budget, but lower inflation. Other major economic developments included an obvious downturn in the civilian sector and the sharpest tax increases in years. Together, these four facts form a coherent picture: the Kremlin fears inflation above all else, while other risks — declining production, bankruptcies, payment arrears, the impoverishment of the population, the disloyalty of the elite, the degradation of infrastructure, and even underfunding of the military and social systems — competed for runner-up in a contest with no winners.

cross-posted from: https://mander.xyz/post/45051999

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“Inflation … starts to rise, especially when, as in Russia, government spending does not go toward anything productive that would help the economy grow. Money loses value, consumption becomes harder, real income growth stops, the stimulus runs out, inflation falls, and the economy begins to retreat. In Russia, this stage has lasted since late 2024. That means the economy has not grown in real terms for a year. Some sectors have begun to decline, and consumption is starting to stagnate.”

Fear of inflation and a reluctance to explain to society why it has been forced to make such large and seemingly pointless sacrifices have combined to push the regime toward an austerity policy for 2026 — raising taxes and cutting spending — including on the military, if official budget figures for next year are to be believed.

But this belt-tightening has come too late. The burden placed on the economy’s net donors — the people and enterprises forced to subsidize everyone else — has already become excessive. Under its weight, the productive sector has begun to contract, causing tax revenues levied on profits, turnover, value added, and existing assets to fall.

The Russian economy that enters 2026 is like a group of people standing on a slowly melting ice floe. The support structure is melting on its own, but the unfortunate polar explorers are also constantly breaking off ever-larger chunks and, out of spite, throwing them at equally desperate people on a neighboring floe. It is hard even to imagine the effort and sacrifices that will be required to return to normality once the leadership on the “Russia” ice floe inevitably changes.

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  • Madison420@lemmy.worldEnglish
    5·
    1 day ago

    Interceptor missiles are and have been a thing since the early 60s. Defense spending doesn’t necessarily mean subs and tanks.

    • wonderingwanderer@sopuli.xyzEnglish
      2·
      1 day ago

      I think I read somewhere that the UK is developing a new lazer that can take down hypersonic ballistic missiles for approximately the cost of the electricity it consumes. Pretty sweet if true.

      • Madison420@lemmy.worldEnglish
        4·
        1 day ago

        I don’t think Russia has an effective stock of hypersonics tbh. If we’ve learned anything it’s that Russian equipment stocks are mostly lies and lack of maintenance.

        • wonderingwanderer@sopuli.xyzEnglish
          2·
          1 day ago

          While true, I don’t think we should base our entire defense strategy on hoping that the russians are so incompetent that they can’t even deploy their most destructive munitions…