Russia's Wartime Economy Grows, But Analysts Warn of Deepening Strain on Households

Trapped in a two-tier economy, Russia's military-spending-fueled industry is booming while households and the civilian sector carry an increasingly heavy burden of crisis. As the Ukraine war enters its fourth year, the Kremlin's massive defense budgets, high interest rates, and state-backed loans are no longer enough to hide deepening cracks. Alex Kolyandr, Europe director at Eurasia Group, told CNBC: If you're lucky and you work in a tank factory, things are fine.

Otherwise, you're most likely facing serious problems. Ukraine's recent long-range drone strikes on Russian oil refineries and distribution depots have exposed the fragile balance of the war economy. While second-quarter growth came in at 1.3%, beating expectations, analysts say the figure is misleading. Kolyandr noted that while the budget can be balanced with temporary accounting maneuvers, rising inflation, high interest rates, and a marked slowdown in the civilian economy point to a worsening picture.