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Russia, Moscow included, has started to feel the economic toll. From households cutting back on food spending to struggling steel, mining and energy companies, the country’s economic engine is showing multiple fractures, and the earlier resilience spurred by massive fiscal stimulus and record energy revenues is being tested.
The degree of suffering is incomparable to that of Ukraine, and is in any case unlikely to prompt Putin to end the war, yet it underlines the ever-higher cost being extracted for his decision to launch the all-out invasion in February 2022.
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“Prices are now rising faster than wages,” said Elena, 27, an event company manager from the Moscow region. Bloomberg withheld her surname to protect her identity in case of repercussions. She’s changed her shopping habits, buying fewer clothes and more domestic brands since imports have become too expensive.
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That’s a sharp contrast with earlier in the war, when gross domestic product was expanding on the back of military-linked investments that drove an almost 20% growth in wages in 2024, boosting consumer demand though also contributing to inflation.
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“The average bill for weekly grocery purchases has more than doubled in recent years,” said Denis, 40, a manager from Tambov, central Russia. Forced to reconsider spending, his family now buys fewer fruits and vegetables.
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Russia’s retail sector is undergoing a major shake-up. Fashion retailers made up 45% of all store closures in the third quarter, with nearly every second outlet shuttering, local media report. According to government-owned Rossiyskaya Gazeta newspaper, the electronics market is experiencing its sharpest drop in demand in 30 years as buyers postpone major purchases.
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Many analysts still expect modest growth this year and next, but the Center for Strategic Research, a Moscow-based think tank, concluded on Nov. 18 that “there is almost no chance left to avoid a recession,” with output having declined in more than half Russian industries.
The steel industry is going through a crisis, with total consumption down 14% this year, according to top steelmaker Severstal PJSC. Demand for steel in construction declined 10%, while in machinery it slumped 32%. Coal mining is facing its worst situation in a decade with major companies cutting output.
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After Putin promised Russians no further tax increases in 2023, the Kremlin has instructed media not to mention his name in reports about the new levies, opposition outlet Meduza, which is banned in Russia, reported.
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