From Heli Simola, BOFIT, in “War’s price tag…”, consensus forecasts from February and from September:

Source: Simola, BOFIT (October 18, 2022).

Not as bad as forecasts from end-March (see this post), but in line with those from early March (see here). Still not good.

An additional reminder that GDP is just output (equals income in national income accounting). But it’s not “welfare” (in the economic sense of aggregated utility).

A further perspective on the war’s costs can be gained by examining Russia’s public sector expenditure. There is, of course, considerable uncertainty built into these calculations as well. War-related expenditure largely falls under the category of defence spending in Russia’s federal budget. Defence spending in 2022 will be up by at least RUB 1,200 billion compared with the pre-war budgeted total. According to Russia’s provisional 2023–2025 budget, its defence spending for that period is being raised by a total of RUB 2,600 billion above the previously budgeted figure. So, since the start of the war, the country’s defence spending is being increased by at least RUB 3,700 billion (approx. USD 53 billion at this year’s official average exchange rate).

War-related expediture may also be included under the category of national security spending. Such spending is also being boosted in 2022–2025 by an overall figure of about RUB 3,700 billion above the previously budgeted level. In other words, current plans show that the war is increasing budget expenditure on defence and national security in 2022–2025 by altogether RUB 7,400 billion (USD 110 billion, or almost 6% of the 2021 GDP total). The expenditure total may even be greater than this, as not all budget spending is itemised. It is also possible that the level of spending might be raised further beyond the budgeted figure. Without the war, the Russian state could have used these funds for advancing the wellbeing of its citizens. Instead, to fund its war, the Russian state will have to cut expenditure on more beneficial matters such as road construction and science promotion. Additional defence spending may boost output in the military industry, but it will not enhance the wellbeing of the country’s citizens.

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