"For the first time since the invasion, the government is confronting a genuine trade-off: whether to build a tank or invest in the civilian economy, said Maria Shagina, a Berlin-based senior fellow at the International Institute for Strategic Studies, a thinktank. For the Kremlin, the choice will always be military spending. But a widening deficit, soaring defence outlays and shrinking revenues are making that choice harder, Shagina added."
"The finance ministry projects GDP growth in 202425 at less than 1%, compared with earlier forecasts of 2.32.5%. German Gref, the powerful chief executive of the state-owned banking and financial services company Sberbank, conceded earlier this month that Russia had slipped into technical stagnation. To bolster state coffers, Moscow announced this week it would increase VAT from 20% to 22%, reversing one of Putin's earlier promises."
Russia is experiencing severe economic strain driven by soaring defence spending, shrinking revenues, and a widening budget deficit. The government confronts a direct choice between military procurement and civilian investment, yet military spending remains the priority. Official forecasts now project GDP growth below 1% for 2024-25, and senior banking officials describe the economy as in technical stagnation. The state has increased VAT from 20% to 22% to bolster revenues, shifting more war costs onto households. Defence outlays now outpace combined European defence budgets and account for roughly 40% of Kremlin spending.
Read at www.theguardian.com
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