When Russia launched its invasion of Ukraine in 2022, most of the world expected its economy to crumble under the weight of sanctions. After all, with more restrictions than any other country in history, things were supposed to get bleak—and fast.
But against all odds, Russia’s economy did something astonishing: it grew. By 2024, it was reportedly outpacing all the G7 countries, including the economic giants like the US, UK, and Germany. The Russian government claimed a 4.3% economic growth rate, which dwarfed growth in many developed countries.
So, what kept the Russian economy on its feet despite sanctions and international pressure? The answer lies in a few major factors.
Military Spending and Redirection of Oil Trade
First, there was a massive surge in military spending. War is costly, and to keep up with the conflict in Ukraine, Russia opened the money tap. This not only boosted industrial output but also kept people employed and factories running.
Second, Russia didn’t stop exporting oil—it just found new buyers. While Europe tried to cut off Russian supplies, countries like China and India stepped in to fill the gap. Russia also used a fleet of ships with shadowy ownership and routes to keep oil flowing without directly violating sanctions.
And let’s not forget the ruble. At one point in 2024, it became the world’s best-performing currency, gaining over 40% in value. All of this painted a picture of an economy that was defying expectations.
But as the calendar moves closer to 2026, that rosy picture is beginning to fade.
Cracks Beneath the Surface: What’s Really Happening Now?
The headline numbers might still look good, but underneath, the Russian economy is struggling with serious issues that could become harder to ignore in the years ahead.
Inflation, Worker Shortages, and Soaring Interest Rates
Let’s talk inflation. Prices inside Russia have been rising fast. In April 2025, inflation touched nearly 10%. This isn’t just about sanctions making imports expensive. It’s also about a major labor shortage.
By the end of 2024, Russia was missing an estimated 2.6 million workers. That’s a huge gap. Many working-age men are either fighting in the war or have fled the country to avoid conscription. Fewer workers mean higher wages, which in turn drives prices up.
To fight inflation, the central bank hiked interest rates to a painful 20%. This might help cool down prices, but it also makes borrowing money more expensive. That’s a big problem for businesses that need loans to grow or survive.
Stagnation and Budget Strains
While the economy boomed temporarily due to war spending, it’s now slipping into stagnation. Economic momentum has slowed down, and the government is starting to feel the heat from its own budget.
Russia’s oil and gas revenues—key pillars of its economy—have taken a hit. Sanctions and changing global markets have pushed prices down, and official numbers show a 35% drop in energy revenues in just one year.
This has created a big hole in the national budget. And since military spending is untouchable, the government is being forced to cut back on things like infrastructure and public services. Roads, railways, utilities—projects in these areas are being delayed or underfunded.
As one analyst put it, the quality of life services in Russia are suffering because so much of the national budget is now locked into war expenses.
Long-Term Worries: Sanctions Bite Harder Over Time
Trouble with Technology and Manufacturing
It’s easy to think Russia has learned to live with sanctions. But that’s only part of the story.
Many Russian businesses are finding it harder to get the technology and equipment they need. This is especially true in sectors like car manufacturing, where Western parts and know-how were once vital.
And it’s not just about cars. Across industries, companies are struggling to source machinery, tools, and software. That limits innovation and slows down progress in areas that once showed promise.
Energy Exports: Oil Adaptable, Gas Not So Much
Russia has done a good job redirecting oil exports, but gas is a different story. Unlike oil, which can be shipped around the world, gas often requires pipelines and long-term infrastructure.
Europe, which used to be a major buyer of Russian gas, has been moving away from it since 2022. New suppliers have stepped in, and the EU plans to phase out most Russian gas imports by 2027.
That leaves Russia with fewer options for its gas, and it’s not easy to find new customers or build new pipelines quickly. This will likely limit the country’s energy revenue in the long run.
The Road Ahead: Is a Crash Coming or Just a Slow Slide?
With so many problems brewing, it’s fair to ask: is Russia’s economy heading for a full-blown collapse?
Economists like Yevgeny Nadorshin in Moscow don’t think so. He sees trouble ahead, yes—but not a disaster. He expects more bankruptcies and financial pain, but also believes the country will avoid a total breakdown.
Russia’s unemployment rate remains surprisingly low. In fact, it hit a record of just 2.3%. That’s largely because the labor pool has shrunk, not because the economy is doing especially well. But it still gives the government room to maneuver.
Still, with inflation high, growth slowing, and budgets tightening, the next couple of years could be very uncomfortable. Even if the economy doesn’t crash, it may drift into a period of stagnation that could last for years.
What Happens If the War Ends?
A peace deal between Ukraine and Russia could change everything. If both sides reach an agreement, some economic pressure on Russia could ease.
There’s even talk that leaders like Donald Trump might want to rebuild ties with Moscow, possibly reopening trade channels or partnerships.
But Europe might not follow suit. Experts say that even if peace comes, European countries will likely stick with many of the sanctions already in place. They’ve invested in energy alternatives and probably won’t go back to depending on Russian oil and gas.
This means Russia’s ability to bounce back fully is limited. Even with new markets in Asia, it may not be enough to fill the gap left by the West.
Final Summary
Russia’s economy has managed to survive what many thought would be a knockout blow. Military spending, oil exports to new buyers, and currency management helped it grow when few believed it could.
But that early resilience is starting to fade. High inflation, worker shortages, reduced oil revenues, and sanctions that bite deeper with time are all dragging the economy into tougher territory.
The country now faces a future where growth is hard to achieve, investment is drying up, and global trade options are shrinking. Even if the war ends, a full return to pre-2022 economic conditions seems unlikely.
For now, Russia is not collapsing—but the road ahead looks bumpy, uncertain, and increasingly costly.
Don’t trade all the time, trade forex only at the confirmed trade setups
Get more confirmed trade signals at premium or supreme – Click here to get more signals, 2200%, 800% growth in Real Live USD trading account of our users – click here to see , or If you want to get FREE Trial signals, You can Join FREE Signals Now!
