By John Q. Hosedrinker 
Russia’s economic growth has sharply decelerated, entering a phase of “technical stagnation” from April-June 2025, according to Sberbank’s head, German Gref. This slowdown, driven by record defense spending, is hampered by weak private consumption and shrinking civilian investment, with the Central Bank expecting near-zero growth in late 2025. Economy Minister Maxim Reshetnikov noted a concerning trend of underutilized factories and cost optimization, along with a July GDP growth of 0.4%, indicating insufficient demand. High inflation and the Central Bank’s key interest rate are contributing to a challenging economic situation, reflecting the limits of Russia’s war-fueled expansion.
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Russian economy hits “technical stagnation,” the biggest bank chief warns of “close to zero” growth, which is the situation unfolding before our eyes. This isn’t just some casual observation; it’s coming straight from the top, from the head of Sberbank, the nation’s largest bank. The official assessment is that Russia’s economy has stalled and is now experiencing “technical stagnation.”
The second quarter of 2025 is being viewed as a period of technical stagnation. Adding to the concern is the expectation that July and August show a near-zero growth rate. This reality reflects the struggles faced by the Russian economy, caught in the crosswinds of sanctions and the ongoing conflict. The admission of near-zero growth speaks volumes, particularly when it comes from such a prominent source. It suggests a situation perhaps even more dire than what’s being publicly acknowledged.
The economic consequences are severe. The high key bank rate, a consequence of the conflict, adds to the pain. A wartime economy often means underfunding the civilian sector, which deals with key bank rates that are among the highest in the world. The ripple effects are being felt across various sectors. Food prices are rising, in some cases matching those of Western Europe, while many citizens earn significantly less.
The impact of the war extends to industries that rely on complex machinery. The automotive industry is struggling, with exports plummeting, and the quality of what’s being produced has declined. Also, many businesses are being nationalized, and Russia’s billionaires are now being used as piggy banks for the war effort. The situation highlights how the conflict is reshaping Russia’s economic landscape and its international ties.
The path ahead looks difficult for Russia, in part due to the ongoing support for Ukraine from Western nations and the imposition of sanctions. The potential outcome is a tragic state of economic near-bankruptcy, potentially accompanied by civil unrest, and external influence. This raises questions about the sustainability of the current course, even if the leaders are able to sell it to the people.
The stagnation is happening despite the heavy investment in the war machine. Zero growth indicates that the economic collapse of Russia is happening too slowly. This is why the Russian leadership may try to seek “peace talks”. Sanctions may benefit Ukraine to end the war. These economic realities are forcing Russia to adapt, with potential consequences for its future.
These economic problems are compounded by internal issues, such as widespread military desertion. Russian soldiers are being sent back to the front lines, and the morale of the troops is very low. The restrictions placed on freedom of expression are a sign of this crisis. The launch of an app meant to increase surveillance suggests the leadership is trying to control any unrest among the people.
Looking ahead, the future of the Russian economy remains uncertain. Whether through continued sanctions, or the end of the war, these will have lasting effects. It is clear that the current economic trajectory isn’t sustainable, which could lead to a transformation, or the collapse of the Russian state. The long-term impacts of the war are still unfolding.