Economic researcher:

“Putin will not run out of money for the war”

Russian President Vladimir Putin has converted his country to a war economy.

(Bild: AP, Ekaterina Varnakova – stock.adobe.com, Krone KREATIV)

More and more sanctions against Russia on the one hand and new billions in aid for Ukraine on the other, but the West does not seem to be able to bring Russia to its knees, neither militarily nor economically. This is also confirmed by the latest figures from the Vienna Institute for International Economic Studies (wiiw).

In Russia, the strong growth of the war economy last year (3.6 percent) is likely to slow somewhat to 2.8 percent this year and continue to weaken in 2025, the economic researchers believe, and speak of clear signs of overheating. Compared to its winter forecast, however, the wiiw has revised its growth expectations for Russia for 2024 upwards by 1.3 percentage points. "Skills shortages and war-keynesianism caused real wages to rise by almost 8 percent last year, which boosted private consumption by 6.5 percent," explains wiiw Russia expert Vasily Astrov. "This development could continue for some time to come. However, the high interest rates are likely to slow down the economic boom and thus inflation."

Positive outlook for the Russian state budget
The outlook for the Russian state budget is consistently positive despite high military spending and a drop in income from fossil fuel exports last year. "Putin will not run out of money for the war," says Astrov.

Economic threat for Ukraine
For Ukraine, on the other hand, the war against Russia is increasingly becoming an economic threat. The difficult military situation and the delays in further financial and military aid from the West are dampening economic development, according to the wiiw spring forecast. "Ultimately, everything stands and falls with sufficient and timely military and financial aid from the West," emphasizes Olga Pindyuk, lead author of the forecast. In 2024 alone, there would be a financing gap of 40 billion US dollars (around 37.6 billion euros) in Ukraine.