On October 24, the Central Bank of Moscovia updated its economic forecast, now expecting annual GDP growth of 0.5-1%, down from the earlier 1.2%. The fourth quarter is expected to see a 5% GDP decline. This is the first time in three years the possibility of GDP contraction is acknowledged. The next year is also anticipated to be challenging for Moscovia’s economy, whose recent growth has been driven primarily by military spending.
The International Monetary Fund is even more pessimistic, lowering its growth outlook to just 0.6% for 2025. This is another decline in the forecast. Moscovia’s Ministry of Economic Development has also downgraded its projections. Quarterly data shows further slowdown: key exports such as mineral products fell 16% (down 8.5% in August year-on-year).
Industry is losing momentum: the first quarter saw 5.7% growth, but only 1.1% in the second quarter. Spare parts shortages, equipment wear, and more complicated logistics are driving down both demand and output. Retail sales have slowed, and consumer demand is falling. For the first time in years, wholesale trade has entered negative territory, indicating shrinking business confidence in future demand.
The state budget is also under pressure: the deficit for the first nine months reached 3.8 trillion rubles (1.7% of GDP), with spending rising faster than revenue. The annual deficit is projected to reach 5.7 trillion rubles (2.6% of GDP). This is mainly due to dropping oil and gas revenues and soaring expenditures.
On October 24, Moscovia’s Central Bank reduced its key interest rate for the fourth consecutive time, to 16.5%. However, inflation remains high (8%) and lending rates for business are still expensive. This deters new investment and economic growth, while high interest and inflation also undermine consumer purchasing power.
Overall, macroeconomic data shows that Moscovia’s war-driven economy has reached its limits, and future prospects remain uncertain. Stronger sanctions, budgetary pressure, and increasingly complex trade logistics present ongoing risks for the country’s economy.
