Russia’s Economy Slows Sharply as Deficit Widens and Costs Mount

Russia's economic engine sputters as fiscal pressures intensify—deficit balloons while operational costs skyrocket.

Budgetary Strain

The deficit isn't just widening—it's accelerating at a pace that's catching analysts off guard. Mounting costs across sectors create a perfect storm of financial pressure.

Economic Slowdown

Growth indicators flash warning signals as the economy decelerates sharply. Traditional fiscal tools appear increasingly ineffective against the mounting headwinds.

Meanwhile, some treasury departments still think printing more rubles will solve everything—because that's worked so well throughout history.

Russia’s economic growth slows sharply in Q2

On an annual basis, growth slowed to 1.1% in the second quarter, down from 1.4% in the first quarter and from 4.5% at the end of last year. Compared with the prior quarter, second-quarter output fell 0.6%.

From January to July, the deficit stood at 4.9 trillion rubles, up from 1.1 trillion rubles a year earlier.

According to the Kyiv School of Economics, which tracks Russia’s budget and oil revenues, spending reached 129% of the plan. Oil and gas takings fell 19% from a year earlier, in part due to slack global oil prices.

Despite sanctions and the loss of most gas sales to Europe, the economy has held up better than expected. Joblessness is at a record low, and household incomes are rising. To finance the deficit, the government has sold ruble bonds to domestic banks, which have been eager buyers expecting rates to keep falling.

UK hits Russia’s oil revenues with new sanctions

Cryptopolitan reported recently that Russia launched its biggest strike in months on Ukraine, hitting a key government building. Hours later, the TRUMP administration and the EU signaled new sanctions together.

Meanwhile, the UK announced 100 new sanctions targeting Russia’s revenues and its “shadow fleet,” unveiled in Kyiv by Foreign Secretary Yvette Cooper.

London said it follows the largest air attack of the war on Ukraine, with more than 800 missiles and drones fired in a single night. Officials said Russia launched 6,500 drones and missiles in July alone, 10 times the level a year ago, with recent strikes hitting the Ukrainian cabinet of ministers, damaging the British Council and EU delegation buildings in Kyiv, and violating Nato airspace over Poland.

On Friday, sanctions were imposed on 70 additional ships in the “shadow fleet.” Another 30 entities and individuals accused of supplying electronics, chemicals and explosives used to manufacture missiles and other weapons systems were also targeted.

Those targeted include China-based Shenzhen Blue Hat International Trade Co. and its Russian co-owners, Elena Malitckaia and Alexey Malitskiy, along with Turkey-based MastelMakina İthalat İhracat Limited Şirketi and its chief executive, the Azerbaijani national Shanlik Shukurov.

“International action to increase economic pressure on Russia and to cut off critical cash flows, which he desperately needs to pay for this illegal war is vital. These sanctions FORM the next stage in the UK’s leading efforts to ramp up economic pressure alongside our security support and our work alongside the coalition of the willing for a just and lasting peace in Ukraine,” Cooper said.

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