2026 GDP Forecast: Russian Economy Stagnates
Russian President Vladimir Putin stated in mid-September at a government meeting that Russia’s economic development was generally in line with the government’s expectations. According to government estimates, GDP growth will reach up to 1 percent in 2026. President Putin highlighted the positive trends in employment, income, and consumption. He pointed to the low unemployment rate of 2.3 percent in July, which was near a historic low. According to Vladimir Putin, wages rose by 6.5% in real terms in the first half of the year. The stable labor market and rising incomes also had an impact on consumer demand, and retail sales increased by 5.4% in the first seven months of this year, the president explained.
The Russian head of state also commented on the decline in the inflation rate. He noted that it had fallen steadily since the second quarter of last year and stood at 6.2% on September 14, 2026. “That is significantly lower than last year. As a reminder: In the first quarter of 2025, inflation was in the double digits at 10.3%,” Putin said, “so the efforts of the Central Bank and the Russian government in this area are clearly having an effect,” the president emphasized.
Kirill Tremasov, an advisor to the head of the Russian Central Bank, told the Interfax news agency that the planned increase in housing-related costs is likely to raise the annual inflation rate by 0.7 percentage points.
Positive Budget Trends
Regarding budget developments, President Putin noted that the federal budget recorded a surplus of 606 billion rubles—equivalent to 6.3 billion euros—in August. According to the report, non-oil and gas revenues rose by more than 18% in the first eight months of this year. The president commented on the benefits of the sharp rise in oil prices for Russia: “We expect government revenues from oil and gas to rise as well in the coming months. This, in turn, will allow us to replenish the National Welfare Fund, which serves as a kind of safety net for public finances.”
Preliminary government estimates indicate that the federal budget will show a deficit of about 3.2% of GDP in 2026. The government is basing its 2026 forecast on an oil price of around $59 per barrel.
Vienna Research Institute: High Interest Rates Cool the Economy
Vasily Astrov, a Russia expert at the Vienna Institute for International Economic Comparisons (wiiw), spoke at length about the development of the Russian economy in an interview with the Austrian news agency APA. “At the moment, I believe the stagnation will continue,” Astrov said. Russia’s economic output is expected to grow by only 0.6% in 2026, he explained. His growth forecast thus aligns with that of the Russian government.
Astrov attributes the current economic slowdown primarily to high interest rates. The key interest rate currently stands at 14%. Astrov believes that President Putin implicitly supports Central Bank Governor Elvira Nabiullina in her efforts to combat inflation. The reason for this is also psychological in nature: “Traumatic experiences during the hyperinflation of the 1990s” continue to have an impact on the Russian leadership, Astrov explained.
At the same time, Astrov noted, government funding for the conflict in Ukraine remains secure despite rising deficits. Russia’s national debt stands at a very low 16% of gross domestic product. The government borrows money primarily from domestic banks, Astrov said. According to wiiw estimates, total defense spending amounts to 7% to 8% of GDP. Of this, 2% goes toward soldiers’ pay. Astrov believes that the direct contribution of defense and weapons production to total economic output is sometimes overestimated—it accounts for only about 2% of GDP.
Are Consumers Better Off?
When asked how a typical Russian household is currently faring economically, Astrov offered a nuanced response: Compared to the situation two years ago, consumer households are worse off; however, compared to the period before the Ukraine conflict, they are better off. He attributed this to the boom in 2023, 2024, and early 2025, with GDP growth rates of 4% to 5% per year, which were achieved as a result of high military spending. Astrov pointed out that lower-income groups benefited particularly strongly from the situation financially: Contract soldiers received a monthly salary of 2,000 euros, lump-sum payments averaging 10,000 to 20,000 euros upon signing their contracts, and compensation of up to 150,000 euros in the event of death or serious injury.
Russia Copes with Sanctions
Astrov doubts the effectiveness of Western economic sanctions: “I’m not a big fan of sanctions.” The Russia expert explains that sanctions often have a counterproductive political effect, fuel anti-Western sentiment, and serve as a convenient excuse for the Russian government to blame economic problems on them. The Russian economy quickly overcame the crisis phase of 2022, when GDP contracted by more than 1%, through adjustment measures, according to Astrov. He added that the sanctions would have little effect without the participation of key countries such as China, India, Turkey, or the United Arab Emirates.
According to Astrov, the reason Russia is able to weather Western economic sanctions so well is that the Russian economy is extremely adaptable and organized along market-economy lines. Small and medium-sized enterprises, in particular, play a central role in circumventing Western sanctions via third countries. However, Astrov warned that the sanctions are pushing Russia into an increasingly one-sided dependence on China. Beijing is exploiting its market power, dictating price cuts on Russian crude oil, and taking an extremely hard line in negotiations over the construction of a second gas pipeline from Western Siberia, which is why no agreement has yet been reached, according to the expert.
Sources: Russian President, Interfax (both RU), Ostwirtschaft, Salzburger Nachrichten, wiiw 1, 2
The full version of the text, featuring numerous charts and tables, was written by Klaus Dormann, a longtime analyst at the energy company E.ON, and first appeared on the business portal Ostwirtschaft.de.
Source: German-Russian Chamber of Foreign Trade, GDP Forecast 2026: Russian Economy Stagnates, Oct. 2, 2026.
This article was prepared for the German-Russian Chamber of Foreign Trade.