The Kremlin’s draft budget proposals reveal a significant increase in defense spending up to $142 billion in 2025, as reported by Bloomberg. This surge is attributed to the ongoing war in Ukraine, with Russia allocating around 6% of its GDP towards defense compared to NATO’s 2% target.
However, this heightened spending poses challenges to Russia’s economy, with labor shortages and restrictions on key growth sectors creating obstacles. These limitations are expected to impact defense-related industries and slow down overall economic growth.
Despite a 4% GDP growth in the first quarter of the year, experts predict a decline to 2% by the end of 2024 and a further drop to 0.5% – 1.5% in 2025. This economic outlook is influenced by Russia’s focus on financing the war in Ukraine, diverting resources towards defense rather than other sectors in need of support.
As Russia navigates these financial pressures, the country faces tough decisions on balancing defense priorities with economic sustainability in the years ahead.
Source link