Putin’s war economy is under strain. One thing is keeping it afloat

Mounting defence expenditure is widening Russia’s budget deficit and increasing strain across its wartime economy, as business and consumer sentiment weakens and economic growth slows.

Economists note, however, that these difficulties do not point to an immediate financial meltdown or economic collapse. High global oil prices linked to the Iran war continue to shore up essential export revenues, allowing the state to fund its four-and-a-half-year-old invasion of Ukraine – for now.

In addition, low unemployment rates and generous government spending in poorer regions are helping to suppress domestic discontent.

This economic baseline fits the Kremlin’s narrative of stability during Russia’s stage-managed parliamentary election , which began on Friday and runs until Sunday.

Yet experts caution that underlying long-term challenges are steadily weakening the economy, creating risks that could eventually precipitate a crisis.

Indicators of consumer sentiment have drifted down since a peak in 2024-25, when increased military spending was pumping up growth and wages. More recently, consumers have coped with higher fuel prices and shortages due to Ukrainian drone attacks that knocked out refineries.

Many small businesses have lost inventory and customers due to strikes against online retailers Wildberries and Ozon.

At the same time, growth has slowed from a peak of over 4 per cent annual expansion in 2023-24. The government foresees 0.6 per cent this year, and the economy shrank in the first quarter before rebounding somewhat in the second.

The consumer sentiment index compiled by the Levada Centre, an independent Russian pollster, fell to 94 over the summer, down from 116 in spring and summer of 2025. Readings under 100 indicate that consumer sentiment is more negative than positive.

People asked about the election in Moscow responded with mostly basic concerns about pensions and prices.

Alexander Vertukhin, a 72-year-old retired military prosecutor, said the government should be focusing on "a decent standard of living for pensioners”.

As for his own situation, “I'm doing fine, both financially and in every other respect”, he said.

“Overall I'd like housing to become more affordable, I'd like pensioners to be able to live decently instead of merely surviving,” said Dmitry Kirillin, 26.

“I'd also like travel in our country to be more affordable. Those are the main things that first come to mind, if I gave it more thought I could probably name more."