The growth forecast for the Russian economy, which is under pressure from massive spending on the war against Ukraine and Western sanctions, has been cut threefold. This was reported by the Deputy Prime Minister of the Russian Federation, Alexander Novak, as cited by Euronews, according to UNN.
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The September forecast by the Ministry of Economic Development of the Russian Federation predicted GDP growth of 1.3%, but this figure has now been revised downward to 0.4%—more than three times lower.
At the same time, the minister expressed hope that next year Russia faces a "period of recovery in growth rates"—from 1.4% in 2027 to 2.4% in 2029, primarily due to the easing of monetary policy.
The updated inflation forecast in the Russian Federation, according to Novak, is 5.2% for 2026, while for 2027 it remains at 4%. The Central Bank of Russia, in turn, predicts inflation in 2026 to be within 4.5–5.5%.
According to estimates by Russia's largest bank, Sberbank, economic growth in 2026 will be 0.5–1%, and inflation will be 6–6.5%. In April, the International Monetary Fund improved its forecast for Russia's GDP growth rate by 0.3 percentage points to 1.1%.
The situation is not saved even by the rise in global oil prices. According to Novak, although the crisis in the Middle East creates conditions for increased export revenues, this effect is not long-term.
"Rising export prices lead to an increase in the trade surplus and current account balance, which contributes to the strengthening of the ruble," the Deputy Prime Minister explained.
EU sanctions are yielding results
An increasing number of macroeconomic indicators suggest that Russia's war-oriented economic system is beginning to fray due to the costs associated with the full-scale invasion of Ukraine launched in February 2022.
In 2021, Russia's military spending amounted to $65 billion (3.6% of GDP). Last year, it rose to $190 billion (7.5% of GDP).
The European Union continues to pressure Russia in an attempt to weaken its ability to wage war. After 20 packages of sanctions, Brussels is noting signs of the Russian economy destabilizing. President of Ukraine Volodymyr Zelenskyy has repeatedly called on partners not to weaken the sanctions pressure.
As Euronews previously reported, in recent months, growing tension in the Russian economy has begun to erode the image of "stability" that the Kremlin tries to project.
According to the Ministry of Economic Development, in January–March, Russia's economy contracted by 0.3%—the first decline since the beginning of 2023. The budget deficit rose to $60 billion, exceeding the annual plan. Inflation remains at nearly 6% despite a high key interest rate of 14.5%.
Even the stock market has shown a decline since March, despite global growth. The Central Bank of the Russian Federation also warns of a labor shortage.
Russian President Putin admitted that the economic situation is developing worse than expected and instructed the government to explain the reasons for the slowdown and prepare additional measures to restore growth.