Vladimir Putin’s invasion of Ukraine is nearing the two-year mark. In the time that’s passed, Russia has lost out on economic growth as it remains under pressure inside and out.
If not for the Ukraine war, Russia’s GDP could have been 5% bigger, according to U.S. Treasury estimates cited by the Financial Times Thursday.
Following the invasion, Moscow’s policy response and sanctions from the U.S. and its allies have put its “economy under considerable economic strain,” said Rachel Lyngaas, the Treasury Department’s chief sanctions economist.
Among the ripple effects of Putin’s invasion on the economy are the “rapidly growing expenditures, a depreciating ruble, increasing inflation, and a tight labor market reflecting a loss of workers,” Lyngaas wrote in a draft memo assessing the financial impact of the Ukraine war, viewed by the FT.
Russia has been under a long list of additional sanctions from the U.S. and the European Union since the invasion last March, making it the most sanctioned country in the world. Even under intense economic pressure, the country has committed big sums of money to defense—about 6% of its GDP for 2024, compared with 3.9% in 2023. By comparison, the U.K. spent 2.2% of its GDP on military expenditures in 2022, while the U.S. spent 3.5%.
Other concerns highlighted by Treasury include inflation that’s nearly double the central bank’s 4% target rate and record-high emigration. The Russian economy is also lagging behind other energy exporters, including the U.S.
“Russia is now more isolated, relying on individuals and entities willing to resupply its military and perpetuate its heinous war against Ukraine,” Lyngaas wrote.
The memo comes just as the Biden administration warned that it would need tens of billions of dollars to continue providing support to Ukraine. Last week, congressional Republicans blocked a White House request for $61 billion to assist Kyiv’s efforts to fight Russia.
