Russia's Economy and the Ukraine War: Impact of Rising Military Spending

Russia's Economy and the Ukraine War: Impact of Rising Military Spending

According to a report by www.fr.de, the US industry service Bloomberg analyzes that Russia is planning massive investments in military spending. The Russian parliament's draft envisages that the defense sector will increase to six percent of gross domestic product (GDP) by 2024. This corresponds to a sum equivalent to 112 billion US dollars (approx. 106 billion euros). Compared to other countries' defense spending, these figures are remarkably high. As Russia dramatically increases its military spending, it is heading towards a “forever war” as it would be difficult to maintain living standards in the country once the conflict ends. Social spending is also expected to increase. However, the Russian economy has already benefited from this rearmament plan, particularly industries linked to the Ukraine war. The growth in these sectors is spectacular, such as transportation with a growth of 66.7 percent compared to the previous year. However, there are doubts that Russia's military is operating efficiently due to limited access to Western technology and a labor shortage. The high costs due to sanctions and the weaker ruble further complicate the situation. Overall, the drastic military spending is having an impact on the Russian economy, which nevertheless remains heavily dependent on raw materials and the energy sector. After a visit to China, President Putin emphasized cooperation between the two countries in the energy sector. Source: www.fr.de

Russia's massive increase in military spending could have a significant impact on the market and financial sector. On the one hand, Russia expects an increased need for defense equipment, which could lead to growth in the relevant sectors. This could have a positive effect on the employee