Putin's economic gamble: Wage growth stalls in Russia
The wage growth of newly hired Russian workers is slowing down. In recent months, the economy under Vladimir Putin has lost momentum. The war-related expenses have been particularly felt by those living on the brink of poverty, assesses the "Financial Times."
According to an analysis of Russian job offers conducted by the "FT", the rapid improvement in the standard of living for Russians, which contributed to expressing support for the war against Ukraine, is coming to an end. The indicator is the slowdown in wage growth for newly hired workers starting at the beginning of 2025.
The conclusions of the "FT" are confirmed by data from the Federal State Statistics Service of Russia (Rosstat), which reported that the growth of real incomes, which also includes income from property rental and interest from savings, fell in the first quarter of 2025 to 7% from an average growth rate of 8% last year.
The newspaper observed that following the launch of its full-scale invasion of Ukraine, the Kremlin significantly increased spending to support a transition toward a war-driven economy. This included payments for conscripts, low-interest loans for military-affiliated companies, and generous mortgage subsidies.
According to Rosstat data, real incomes fell after the war began but rebounded at the end of 2022 and started growing at a pace not seen in over a decade. It was stressed that "even the cumulative inflation, amounting to about 30% over three years, did not negate these gains."
In the opinion of the British journal, Putin's war-related expenses have been particularly felt by those living on the brink of poverty.
For example, some families living in poverty are now receiving money from husbands conscripted to the front. The state uses money to calm social tensions, said Aleksandra Prokopenko, a collaborator at the Carnegie Russia Eurasia Center in Berlin.
The financial situation of Russians is worsening
The British journal cited research results conducted by a group of independent Russian researchers called Chronicles. According to them, 40% of Russians confirmed a deterioration in their financial situation. Meanwhile, the same number reported no change in their finances (40%), and 20% observed improvement.
Aleksei Minyalo, co-founder of Chronicles and an opposition figure, believes there is a link between Russians' sense of well-being and their support for the war in Ukraine. He argues that as people's financial situations become more difficult, their likelihood of supporting the war decreases.
As a signal of the weakening war economy of Russia, the "FT" cited official estimates of Russian GDP growth, which is expected to fall to about 2% in 2025, which represents a significant slowdown compared to the average of 4% over the past two years. The latest forecasts from the International Monetary Fund also point to a slowdown in Russian GDP growth to 1.5% this year and 0.9% in 2026.
