The "war Engine" Of Putin's Economy Has Begun To Sputter
- 29.09.2026, 6:00
The Russian military-industrial complex has hit a ceiling, despite the trillions poured into the war.
During the war, Russia sharply increased its arms production, but the defense-industrial complex has now reached its limits. Between 2023 and 2025, the three main sectors—which include military products—namely the production of “other transportation vehicles and equipment,” “computers, electronic, and optical products,” and “finished metal products”—increased output by 1.9 to 2.1 times, according to Rosstat data. However, over the next three years, they will grow much more slowly, forecasts the Ministry of Economic Development.
Production of “computers, electronic, and optical products” will grow by approximately 5% per year following a 12.9% increase in 2025, and by 2029 will be 22.5% higher, according to the forecast. Production of “finished metal products” will increase by 19.6% over four years, including 10.6% this year, after which growth will slow to 2–3% per year. Production of “other vehicles,” which includes drones, will grow the fastest—by 75.3%—but growth is slowing here as well. Last year, it stood at 33.9%; this year, the Ministry of Economic Development expects 22.4%; next year, 14.4%; and in 2029, 8.9%.
When making forecasts, experts at the Ministry of Economic Development carefully review all production plans, notes economist and former Deputy Minister of Finance Sergey Aleksashenko. From this, he concludes that “there is no spare capacity left in the Russian defense-industrial complex.”
The sharp increase in military spending has been one of the main drivers of economic growth in recent years. Over the first four years of the war, investment in three military sectors more than doubled. The defense-industrial complex consists mainly of state-owned enterprises, and in order to fulfill the increased government orders, they have sparked a wage race, noted Andrei Yakovlev , a visiting researcher at the Davis Center .
Analysts at Intesa Sanpaolo cite the military-industrial complex as the main driver of economic activity in Russia. In their view, this trend will continue: the economy will become increasingly dependent on government spending and the military sector, while the civilian economy will gradually contract. Even at these slower rates, the defense industries are among the fastest-growing sectors in the government’s forecast. Only the pharmaceutical industry can compare to them, with output in 2029 expected to be 39% higher than in 2025. Drug production is a rare exception; most sectors outside the military-industrial complex are stagnating or seeing a decline in output. Since mid-2023, they have been in a state of “near-stagnation,” and since the second half of 2024, they have entered a decline, noted the CMACP, an analytical center close to the government.
In certain categories of weapons systems—primarily drones—Russia will most likely maintain high production rates, according to a July report by the Center for Strategic and International Studies (CSIS), which examined five major defense companies. Russia is restructuring its armed forces on a scale that the West may not fully appreciate, noted one of the report’s authors, Maria Snegovaya: by combining Soviet-era industrial capacity with increased production of drones, compact electronic warfare systems, and other relatively inexpensive technologies manufactured in vast quantities.
But overall, the Russian defense-industrial complex, despite massive infusions of funds, is in decline—a conclusion reached a year ago by researchers at Chatham House. It is not succeeding in creating truly new, technologically advanced systems: import substitution has failed, dependence on foreign suppliers remains high, and Russia has to rely on its Soviet legacy, they noted, believing that in the coming years, Russia will have to simplify and slow down military production, as well as accept a decline in product quality.