In the past year, Russia's economic growth has drastically slowed, only achieving a 1% increase compared to the expected 4% growth in the following years. This decline can be partly attributed to the massive costs incurred by the ongoing military operations in Ukraine, which had initially spurred growth and prevented a projected economic collapse following the invasion's commencement in 2022. However, as military expenditures rise, inflation has also surged significantly, leaving businesses frustrated with high borrowing costs that are stifling growth.

The Russian Central Bank has indicated that the economy is moving towards a more balanced growth pattern, acknowledging the cooling effect of the current economic climate. In a recent statement, it highlighted that inflation had accelerated notably in January due to specific factors, particularly the increase in taxes. There are ongoing concerns that inflation will remain elevated, which may hinder an eventual slowdown in inflation rates, complicating economic recovery plans for the near future.

Consequently, the Central Bank has announced that interest rates will need to remain elevated beyond original forecasts, projecting rates to average between 13.5% and 14.5% this year. This determination reflects a more cautious approach to monetary policy as the bank braces for ongoing economic challenges. The implications of this trajectory are significant for both domestic businesses and international relations as Russia grapples with the consequences of its military engagements and their impact on its economy.