War and the economy in Russia and Ukraine

Published on December 18, 2024 at 6:52 p.m. / Modified on December 19, 2024 at 06:33.

3 mins. reading

Stewardship, as we know, is crucial to the conduct of war, and this of course applies to the conflict between Russia and Ukraine. As in military matters, the situation is profoundly asymmetrical. The Russian government has very ample resources and is devoting them amply to the war, while Ukraine sticks its tongue out. But this image must be nuanced, knowing that in times of war, the information available is subject to caution.

The Russian economy is booming. Growth was almost 4% in 2024, which is not surprising for a war economy, when military spending is exploding. The production of military equipment, which covers a vast field of activity, and the increasingly generous salaries paid to soldiers (and their families in the event of death) make fiscal policy very powerfully expansionary. Unemployment has practically disappeared in the face of very high demand for labor while supply seems to be falling, due to combat losses and flights abroad – the figures are poorly known. One might expect a huge budget deficit, but it is officially small. Explanations include rising oil revenues – a measure of the ineffectiveness of sanctions – and tax revenues made abundant by growth and increased tax pressure.

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