Russia has announced plans to increase its defense spending by 25% to a record high of 13.5 trillion rubles ($142 billion) in 2025. This substantial increase, outlined in draft budget documents published on the parliament’s website, signals Russian President Vladimir Putin’s commitment to continuing the war in Ukraine and escalating tensions with the West.

The proposed budget allocation for defense and security will account for approximately 40% of Russia’s total government spending, amounting to 41.5 trillion rubles in 2025. This shift towards what economists term “military Keynesianism” has led to a consumer spending boom and rising inflation within Russia.

Experts note that this massive investment in the military sector has raised concerns among European war planners, who now believe they underestimated Russia’s capacity to sustain a prolonged conflict. 

The situation is further complicated by uncertainty surrounding future support for Ukraine from its allies.

However, the long-term economic outlook for Russia remains bleak. Despite efforts to pivot towards China and other markets, analysts believe that sanctions-busting and alternative strategies cannot fully compensate for the loss of direct access to Western markets and technology.

The focus on military spending has come at the expense of other sectors, with social spending expected to decrease by 16% from 7.7 trillion rubles this year to 6.5 trillion rubles in 2024. This reallocation of resources has led to concerns about the impact on education, healthcare, and social policies.

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