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The economy of Russia is an emerging and developing, [2] high-income, [27] industrialized, [28] mixed market-oriented economy. [29] It has the eleventh-largest economy in the world by nominal GDP and the fourth-largest economy by GDP (). [5]
With the central bank now operating in the shadow of stagflation, the worst may still be ahead. Data released on Wednesday showed that Russia's economy slumped 3.1% year over year in the last quarter.
While soaring defense spending has fueled Russia's economy in recent years, it has also contributed to rising inflation, which Russian President Vladimir Putin said could hit 9.5% in 2025.
Russia's central bank says inflation is rising while the nation's economy cools. These are the key ingredients for stagflation, a scenario that's harder to combat than a recession.
And yet, Russia can't easily stop the war without shutting off one of the key engines of its economy: its hefty defense budget. The nation allotted a record 6% of GDP to defense spending in 2024.
[1] [2] Steady economic growth began in the 1890s, alongside a structural transformation of the Russian economy. [1] By the time World War I started, more than half the Russian economy was still devoted to agriculture. [1] [3] By the early 20th century, the Russian economy had fallen further behind the American and British economies. [1]
In the aftermath of the Russian invasion of Ukraine in 2022, the country has faced revamped sanctions and corporate boycotts, [385] becoming the most sanctioned country in the world, [386] in a move described as an "all-out economic and financial war" to isolate the Russian economy from the Western financial system. [215]
The inflationary pressures on the Russian economy remain high, despite the Russian Central Bank setting an interest rate of 18%. An annualized rate of price increases from May to July stands at 10 ...