Russia faces economic strain as U.S. pushes for peace talks
President Vladimir Putin has expressed concerns about the state of the Russian wartime economy, which is grappling with inflation, labour shortages, and high interest rates. Meanwhile, the new U.S. President, Donald Trump, is advocating for a negotiated end to the conflict in Ukraine, reports Reuters.
Despite the dynamic growth of Russia's GDP in 2023–2024, projections for 2025 indicate an economic slowdown, with expected growth of less than 1.5 per cent. High wartime expenditures, which are anticipated to reach a record 6.3 per cent of GDP in 2025, along with inflation approaching double-digit values, are significantly straining the Russian economy.
Additionally, interest rates of 21 per cent are making it difficult to access credit, which concerns entrepreneurs and investors, notes Reuters.
Trump pushes for conflict resolution
Donald Trump, the new President of the United States, has announced a swift resolution to the conflict in Ukraine. He suggests that without negotiations with Russia, his administration will impose additional sanctions and tariffs to pressure the Kremlin.
Vladimir Putin, while appreciating the efforts of his economic officials, increasingly emphasizes high loan costs and an overheated economy as key challenges to address, reports Reuters.
Record wartime expenditures are limiting investment opportunities in non-defence sectors. Although Putin declares readiness to continue the conflict as long as necessary, the growing impact of war costs on the economy strengthens voices calling for a diplomatic solution. Among the critics are both entrepreneurs and some members of the Russian political elite.
Kremlin spokesman Dmitry Peskov describes the economic situation as stable, although acknowledges that problems are being felt. Elvira Nabiullina, head of the Central Bank of Russia, defends high interest rates, pointing out the necessity of combating inflation driven by massive wartime spending. At the same time, increasing pressure for changes in monetary policy may influence the authorities' future decisions.
Although the Kremlin has not yet publicly received concrete negotiation proposals, the upcoming actions of the Trump administration may force Russia to seek diplomatic solutions. As the costs of the war become increasingly visible, the pressure to end the conflict may only grow, it reads.
