Ukraine and Russia are about to receive an important package of “aid” for the war. A very special shipment from the United States is expected in kyiv: $1.7 billion in weapons approved by the Biden administration. On the other side, Moscow has just made the 2025 budget official, and the numbers do not leave much room for speculation in defense spending. These are the figures with which Morocco’s GDP moves.
A huge expense. Russian President Vladimir Putin approved a federal budget that raises defense spending to record levels, allocating no less than 13.5 trillion rubles ($126.8 billion) by 2025, compared to 10.8 trillion rubles in 2024. This represents 32.5% of the federal budget, a more than significant increase compared to 28.3% this year.
There is no doubt that the increase in military spending reflects Russia’s commitment to its military campaign in Ukraine, which will enter its fourth year in February, and reinforces the centrality of war activities in the country’s economy. To put it in perspective, spending is around the GDP of a country like Morocco (133K), or exceeds that of countries like Ukraine or Guatemala. In fact, it is not far from the GDP of Ukraine (164k).
Impact on the Russian economy. The budget, the highest to date, comes in an economic context marked by inflationary pressures and a weakened ruble that has reached 32-month lows. Inflation fueled by war activities has led the Russian central bank to raise the key interest rate to 21%, an all-time high. However, the central bank governor has signaled that the economy could be at a “tipping point,” expecting rate cuts as inflation eases.
Although the Russian economy has managed to stay afloat despite Western sanctions, dependence on military activities is generating a kind of “overheating” in the stock market. Indeed, analysts warn that this approach could compromise the sustainability of social programs critical to maintaining the stability of Putin’s regime amid growing economic pressures.
Perspectives. Russia’s economic forecasts reflect short-term optimism, with GDP growth expected to be 3.9% in 2024 and 2.5% in 2025, although a slowdown is expected to 1.9% in 2025. These figures exceed estimates from the International Monetary Fund (IMF). ), which projects growth of 3.6% by 2024 and 1.3% by 2025. However, the bank director VTB, Andrei Kostin, admits that the extraordinary conditions of war and sanctions have left or will leave inevitable impacts on the economy.
Ukraine finally receives help. For his part, United States Secretary of Defense Lloyd Austin announced this weekend a new military assistance package for Ukraine valued at $988 million, raising the total aid in the last week to $1.7 billion. . This package includes additional drones and munitions for HIMARS systems, critical to Ukrainian defenses, and is part of the Ukraine Security Assistance Initiative, designed to strengthen long-term military capabilities beyond the immediate impact on the battlefield. battle.
Emergencies before Trump. The aid also arrives in a context of uncertainty. The Biden administration is accelerating the use of funds approved by Congress, mindful of questions about continued support for Ukraine once President-elect Donald Trump takes office. Trump, a critic of military aid to Ukraine and with a mixed relationship toward Vladimir Putin, has advocated for a quick end to the conflict, raising concerns about possible concessions in future negotiations.
International context and support. We told it last week. Ukraine faces an intensification of the Russian offensive, and in this context, US military support has been vital to prevent Ukraine’s fall to the largest military force in Europe. Since the start of the Russian invasion in February 2022, the United States has provided more than $62 billion in military assistance.
Meanwhile, European leaders, such as French President Emmanuel Macron, are trying to persuade Trump to maintain military support for Ukraine. At a meeting in Paris this weekend with Volodymyr Zelenskyy, Trump reiterated his focus on quickly ending the war, which could mean unfavorable terms for Ukraine. Or maybe not. Nobody knows at this point where Trump will point his finger to end the war “as soon as possible.”
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