Russia’s Economy Braces for Prolonged Strain in 2026
After demonstrating resilience in late 2024, the economy overheated in early 2025, driven by surging defense spending and strong domestic demand. That momentum quickly faltered as capacity limits and tighter monetary policy took hold in the second half of the year.
According to figures compiled by Anadolu, growth slowed sharply from 3.6% at the end of 2024 to just 0.6% in the third quarter of 2025 — the weakest pace in two years.
The Russian Economic Development Ministry cut its 2025 forecast from 2.5% to 1% in September, citing falling global energy prices and waning investor confidence.
The Russian Central Bank’s aggressive interest rate stance dominated the economic agenda last year. The benchmark rate, which opened 2025 near 21%, remained in double digits throughout the year as policymakers sought to rein in inflation above 10%.
By the final quarter, inflation eased to around 6.5–7%. Yet Central Bank Governor Elvira Nabiullina warned there would be no relaxation of monetary tightening, stressing that “labor reserves were almost completely depleted and production capacities had reached their limits.”
Business leaders have criticized the policy, pointing to stalled investment outside the defense sector. More than 30% of companies are now operating at a loss.
Outlook for 2026: Stagnation Ahead
Government budget projections show growth capped at 1% this year, underscoring what analysts describe as a shift from cyclical slowdown to structural stagnation.
Volatile oil prices and shrinking natural gas exports continue to erode revenues, while the ruble’s 30% surge against the dollar last year has further squeezed exporters.
War-related spending remains a heavy burden, with authorities targeting a budget deficit of 1.6% of GDP in 2026. Public debt is also expected to edge higher from the 17.7% level recorded at the end of 2025.
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