The Impact of War in Ukraine on Russia's Economy and Isolation

The Kremlin is increasing defense spending by 70% in 2024, signaling a long-term war in Ukraine. This boost in spending is benefiting depressed Russian regions and sectors related to the war effort, such as food, construction, and pharmaceutical manufacturers. The increase in troops also creates a demand for uniforms, prosthetics, and mortuary services. The depressed regions where defense industries are located are experiencing an economic boom. The government's financial compensation for men enlisting in the army is also contributing to the regions' prosperity. However, doubts remain about the sustainability of Russia's wartime economy, as there is an imbalance between supply and demand, and the country is facing a budget deficit after 2024. Meanwhile, large metropolitan cities like Moscow and St Petersburg have been relatively unaffected by the war and Western sanctions.