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Russia's economy is experiencing a sharp slowdown in growth, according to a report released by the governmental statistics agency Rosstat on May 16.
Gross domestic product (GDP) only grew by 1.4% in the first quarter of 2025 – a notable decline from 4.5% growth in the previous quarter and 5.4% in the same period last year, the Moscow Times reported, citing Rosstat data.
The latest data from Rosstat came in below expectations: the Russian Economic Development Ministry estimated GDP growth at 1.7% and Bloomberg analysts predicted 1.8% growth.
According to Egor Susin, an executive from Gazprombank (the third largest bank in Russia, currently under sanctions), Rosstat's data show a "sharp slowdown in the economy."
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Some aalysts point to Central Bank policies, sanctions, supply difficulties, and high inflation as reasons for the economy's decline.
Moreover, "the situation is complicated by low oil prices," Raiffeisenbank analysts note, as oil and gas revenues fell 10% from January to April.
A recent report from the Stockholm Institute of Transition Economics (SITE) also revealed that, despite narratives from the Kremlin, Russia’s economy is under increasing strain from its war in Ukraine and Western sanctions.
A recent Reuters calculation sees Russia's oil and gas revenue -the most important source of cash for the Kremlin, accounting for about a quarter of total federal budget proceeds- falling by a third in May 2025 from a year earlier to 0.52 trillion roubles ($6.48 billion), the lowest level since July 2023 amid weaker oil prices and a stronger rouble.
As Moscow and Kyiv discuss potential peace deals, the Russian economy may face another shock if military spending is reduced. Conversely – if peace talks fail – Europe and the United States may impose additional sanctions on Russia, putting further strain on its economy.
War Economies are weird. The only reason why the numbers are that high is because of all the military spending. Transitioning to peace time will cause russian economic collapse.
War economies usually crash when trying to return to normalcy. That's why Putin doesn't want peace at reasonable terms: Because if he doesn't have a total and complete victory, it's going to be hard to distract from the complete and total collapse. The longer this goes on, the worse the fall will be, but he doesn't have much of a choice.
This is (one of the reasons) why I hope sanctions remain in place even after a peace deal - Because there will be one obvious person that can be thrown under the bus, and I'm sure most russians secretly want to see the main defenestrator defenestrated.
That is also why the frozen Russian assets are so important. If they are given to Russia, it would be rather easy to make that transition.