The War Is Driving russia’s Economy Into a Dead End

For the first time in five years, the ministry of economic development of the rf has officially recorded a decline in industrial output. By the end of 2026, a 0.2% drop is expected instead of the previously forecast 0.6% growth. Over the first eight months of this year, this indicator remained at zero, in August it fell by 0.8% year-on-year. This negative trend is a direct consequence of the kremlin’s shift of russia’s economy to “war footing”.

A key factor was the decrease in domestic demand, caused by high inflation, currency fluctuations, and expensive borrowing. At the same time, due to a reduction in state defense orders amid the economic crisis, production is winding down even at defense industry enterprises – which (according to moscow’s promises and calculations) were supposed to shore up the country’s overall economic situation.

The sectors most severely affected are those directly dependent on consumer spending and credit: the automotive industry, construction, agriculture, and the chemical industry. The decline in revenues is turning regions into subsidy-dependent areas, which further erodes the population’s purchasing power. Currently, 65 regions of the rf are unable to support themselves without assistance from the central government and are subsidized, while only 24 remain donor regions.

Overall, russia’s metallurgy sector has lost 5.2% of its total output, the chemical industry – 3%, the garment industry – 4.2%, elevator production fell by 20%, the production of freight rail wagons – by 30%. Production of petroleum products has been declining for the third month in a row, oil production could fall to a 17-year low by the end of the year.