Russia's economy is sliding into stagflation: intelligence stated that tight monetary policy stifled business activity
Kyiv • UNN
Russia's economic indicators signal a slide into stagflation. The tight monetary policy of the Russian Central Bank stifled business activity.
Russia's economic indicators are increasingly signaling a slide into stagflation. The Russian Central Bank's tight monetary policy has effectively stifled business activity and exacerbated the stagnation processes, which have already become systemic, UNN reports with reference to the Foreign Intelligence Service.
Details
According to intelligence data, economic growth almost stalled in 2025: GDP hovered around zero (-0.3% in Q1, 0% in Q2, +0.1% in Q3). Even a slight recovery in the middle of the year was limited to the military-industrial complex and certain segments of raw material industries and did not create any impulses for the civilian economy. Investment activity, after a short rise at the beginning of the year, sharply declined: in Q2 and Q3, investments in fixed capital decreased by 3.7% and 1.7%, respectively. Businesses abandoned modernization, cut purchases of equipment and investment goods, and the deficit of financial resources will persist even if monetary policy is eased.
Additional pressure is created by the budget sphere. The state reduced incentives through tax changes, and in 2025, maintaining high expenditures against the backdrop of falling revenues led to an increase in the deficit. In 2026–2028, fiscal policy will become a restraining factor due to reduced spending and increased tax burden, consolidating an inertial scenario of prolonged stagnation with increased risks of stagflation. Domestic demand remains the most vulnerable. The business confidence index in retail trade in 2025 was consistently in the red, and in Q4 it fell to -6 – the worst level since 2022. Against this background, 44% of retailers in 2026 expect a decrease in profits and profitability, while only 29% expect sales growth – the lowest figure in a decade
In addition, according to intelligence, consumer sentiment is rapidly deteriorating: since June 2025, sales have been declining in the vast majority of product categories, and during the New Year holidays of 2026, shopping mall attendance fell by almost 20% year-on-year. High interest rates sharply increased costs and the cost of lending for small and medium-sized businesses, limiting working capital financing.
The Russian retail sector demonstrates weak adaptability and structural fragility. Business pessimism, expectations of falling profitability, and reduced investment are increasingly turning into a self-reinforcing factor of decline, the intelligence service summarized.