A European intelligence report reveals that over half a million Russians were declared bankrupt last year, highlighting the growing financial strain on the country's banking system as the war in Ukraine continues.

Russia's Ministry of Economic Development has slashed its 2026 GDP forecast from 1.3% to 0.4%, while rising household debt is creating conditions for a potentially 'explosive' banking crisis, according to the report seen by Reuters.

Russian banks have issued increasing numbers of risky loans to support the war effort and help citizens cope with the cost-of-living crisis. The report estimates that 10% of corporate loans are now doubtful, up sharply from two years ago.

However, experts downplay the likelihood of a full-blown banking crisis. Vladislav Inozemtsev of Chatham House notes that Russia's banking system is dominated by a few large, heavily supervised banks, making a systemic collapse unlikely.

Despite record bank profits, the wartime economy faces long-term challenges: heavy military spending, lack of innovation, brain drain, and falling investment. Inozemtsev concludes that no economic improvement is likely before the war ends.

Source: www.aljazeera.com