The Russia-Ukraine conflict has been going on for two years, and it has had a profound impact on the global economy. However, for Russia, has the conflict brought economic gains, or has it caused economic losses?
First of all, we need to understand that war itself is a huge economic drain. According to the International Monetary Fund**, the Russian economy expects a moderate decline in 2022, a slight contraction in 2023, and healthy growth in 2024. However, this ** may not take into account the actual impact of the war on the Russian economy. Because the war is still ongoing, it means that this figure is exaggerated by soaring military spending.
Second, Russia's military spending soared after the start of the conflict. According to reports, Russia's defense spending has been 4 percent of GDP since 20211% pushed up to 7% last year. This has undoubtedly put a huge pressure on Russia's fiscal revenues. Moreover, as the war drags on, Russia's fiscal revenues are declining, and they are falling rapidly.
In addition, Russia's oil and gas sales revenue has also been affected. Oil and gas sales account for the majority of Russia's revenues. However, recent oil prices** have denied Russia the opportunity to replenish funds for the war.
Finally, Russia's public spending deficit is increasing. According to the Ministry of Finance, the combination of rising costs and falling revenues led to Russia's public spending deficit of $25 billion in January. This means that Russia's annual deficit is likely to increase from the current 2The 5% level has soared, and the current account surplus of $250 billion at the end of 2022 is likely to disappear by the end of 2023.
The Russia-Ukraine conflict has put enormous pressure on Russia's economy. While Russia is taking various measures to counter this pressure, as things stand, it is possible that Russia is losing money in this conflict. However, the impact of the war goes far beyond that, it could also have a profound impact on Russia's economic prospects.