Ukraine says Russia’s economy faces deep crisis akin to late Soviet era

Russia’s economy is experiencing its deepest crisis in the past two decades, Ukraine’s Foreign Intelligence Service reports. Preliminary results for 2025 show a sharp slowdown in industrial growth, a record federal budget deficit, and significant financial losses among businesses.

“Experts note that the old model of state capitalism, sustained by massive budget injections, is running out of steam,” the statement said.

Currently, nearly half of Russia’s state budget expenditures go toward its war-mongering effort in Ukraine, which Moscow invaded in February 2022. 

Industrial production has nearly stalled. While growth has reached four to six percent in 2023 and 2024, it amounted to just zero-point-eight percent in the first eleven months of 2025.

“The most telling indicator is the slowdown in the manufacturing sector,” the intelligence service said.

The financial position of private companies is deteriorating. 

In 2025, the federal budget deficit climbed to five point six five trillion rubles, surpassing even the level recorded in 2020 during the pandemic. Despite efforts to rein in spending, government expenditures remain at record highs, fueling elevated inflation and prompting the authorities to raise taxes.

“Analysts are increasingly comparing the current situation to the delayed crisis of the late Soviet Union, when economic problems were long masked by borrowing,” the intelligence service said.

Although the scale of today’s challenges is not yet comparable to the collapse of the 1990s, Russia “inevitably faces a prolonged period of economic turbulence.”