from Heli Simola, BOFIT, in “The Price Tag of War…”Consensus forecast for February and September:
resource: Simola, BOFIT (Oct 18, 2022).
Not as bad as the end-March forecast (see this postal), but consistent with that in early March (see here). Still not good.
Also as a reminder, GDP is only output (equal to income in national income accounts). But this is not “welfare” (in the economic sense of combined utility).
The cost of war can be further understood by studying Russia’s public sector spending. Of course, there are also considerable uncertainties in these calculations. War-related expenditures largely fall under the category of defense spending in the Russian Federation budget. Compared with the total pre-war budget, defense spending in 2022 will increase by at least 1.2 trillion rubles. According to Russia’s interim budget for 2023-2025, defense spending for the period has increased by 2.6 trillion rubles from previous budget figures. As a result, the country’s defense spending has increased by at least 3.7 trillion rubles (about $53 billion at this year’s official average exchange rate) since the start of the war.
War-related expeditions may also be included in the category of national security spending. Such expenditures will also increase in 2022-2025, with the overall figure about 3.7 trillion rubles higher than the previous budget level. In other words, current plans show that the war adds 7.4 trillion rubles ($110 billion, or almost 6 percent of total GDP in 2021) to budget spending on defense and national security in 2022-2025. The total expenditure may even be larger than this, as not all budget expenditures are itemized. Spending levels are also likely to increase further beyond budget figures. Without the war, the Russian state could have used these funds to promote the well-being of its citizens. Instead, to fund its war, the Russian government will have to cut spending on more beneficial things like road building and scientific outreach. Additional defense spending may increase the output of the military industry, but not the well-being of the country’s citizens.
