War Costs Dim Russia’s Growth as Deficit Widens and Rate Cuts Stall

Five years into Russia’s war, the economy shows growing vulnerabilities: the budget deficit widened in early 2026 despite higher oil revenues, the central bank has limited room to cut rates as inflation hovers around 5–6%, and the ruble remains strong with export pain. Unemployment sits at a record low but masking a shrinking labor pool and aging population, while the National Wealth Fund’s assets have fallen. Forecasts put 2026 GDP growth around 0.5–1.5%, fueling debate over whether continued war spending can yield sustainable growth or will demand more state intervention.