Russian Economy Nears Stagnation as Regions Sink Deeper into Budget Deficits

The Russian economy is on the verge of stagnation, GDP growth has almost stopped, industry is shrinking, and regions are accumulating huge budget deficits while spending money on military payments. 

The Gaze reports on it, referring to the Center Countering Disinformation and the Foreign Intelligence Service of Ukraine.

The Russian economy has almost come to a standstill: according to official data, in July 2025, GDP growth was only 0.4% year-on-year, indicating actual stagnation.

For comparison, in June, growth was 1%, and in December last year, it was 4.5%, meaning that the economy slowed down almost 11 times in six months.

It is important to note that the industry is on the verge of zero growth. Sectors that showed growth last year are now shrinking. For example, furniture production fell by 12%, clothing by 7%, electrical equipment by 6.5%, and metallurgy is experiencing a decline of more than 10%. 

Even the military-industrial complex, which is critically important to the Kremlin during the war, is only partially maintaining its growth rate, with metal and electronics production falling by 3.5–5 times.

Reserves to support the economy are also almost exhausted. “To continue financing the war, the authorities will be forced to raise taxes and take resources from civilian sectors, which will further slow down development,” the statement follows.

Clear evidence of the difficult economic situation in Russia is that Russian regions are drowning in deficits.

In the first half of 2025, Russia's consolidated budget deficit grew to nearly $52 billion, with many regions failing to meet their planned revenues.

In particular, the Kemerovo region, which planned a gap between revenues and expenditures of $170 million by the end of the year, already recorded a deficit of $380 million in January-July due to Western sanctions on coal and low demand for metallurgical products.

In Bashkortostan, the budget deficit exceeded the planned figures by half, and in Yakutia, actual expenditures for the first half of the year exceeded the plan by 300%. Even the Rostov region, which was initially planned to be in surplus, expects a budget revision towards a deficit of $242 million by the end of the year.

Despite financial difficulties, local authorities continue to actively report on increases in one-time payments to “volunteers” under contract with the Ministry of Defense to participate in the war against Ukraine.

As The Gaze informed earlier, amidst the rapid reorientation of Russian state finances toward the war against Ukraine, the authorities are significantly reducing instruments to support small and medium-sized businesses.