Mixed Views on the Russian Economy – What Does the Central Bank Expect?

May 11, 2026 · 13 min read · By Klaus Dormann · Original (German)

Author: Klaus Dormann

In mid-February, the Russian Central Bank had still ventured a forecast that the Russian economy would grow by 1.6% year-over-year in the first quarter of 2026. However, it had to significantly revise this expectation on May 7. The Central Bank now estimates that Russia’s real gross domestic product fell by 0.5% in the first quarter. The “Institute for Economic Forecasting of the Russian Academy of Sciences” estimates the decline in GDP in the first quarter at 0.4%, while the Russian Ministry of Economic Development puts it at 0.3%. The Federal State Statistics Service (Rosstat) will publish its first estimate of first-quarter GDP growth on May 15 (Kommersant, Vedomosti).

But how credible are “official” Russian economic data in the first place?

The wide range of preliminary estimates and forecasts regarding the development of the Russian economy, along with the rather controversial internal Russian debate on economic development, speak to the credibility of the economic data ultimately determined by the Federal State Statistics Service (Rosstat) and the government. However, the credibility of this data was recently disputed by the head of Swedish military intelligence, Lieutenant General Thomas Nilsson, in an interview with the “Financial Times” on April 19.

Many Western media outlets reported on this. “Der Spiegel” wrote that Nilsson had stated in the FT interview that Sweden possessed intelligence indicating that Russia systematically manipulates its economic data. Even the government’s official data painted an “alarming picture” of the economy’s development. According to Nilsson, however, the actual situation is even worse. The Russian Central Bank is “downplaying inflation.” Thus, according to watson.ch, Nilsson doubts that inflation in Russia stands at 5.86%, as reported by Rosstat. Rather, he believes the inflation rate is close to the central bank’s key interest rate of 15 percent.

However, Alexander Kolyandr, a senior fellow at the Brussels-based “Center for European Policy Analysis (CEPA),” immediately rejected this assessment in a commentary for the British magazine “The Spectator” as early as April 21. According to Kolyandr, Nilsson’s assumption that the Russian inflation rate is actually around 15% is likely based on earlier publications by the Russian market research firm Romir regarding price trends. However, Romir did not calculate a representative consumer price index like the statistical office Rosstat, but only tracked prices at retailers in around 250 Russian cities (“the prices of products in the weekly supermarket shopping basket”). In doing so, Romir reportedly regularly found significantly higher price increases than the representative Rosstat index. Kolyandr’s criticism, however, apparently went largely unnoticed in Germany.

Janis Kluge: “There is no systematic falsification of inflation data”

In an interview with Der Spiegel last week, Dr. Janis Kluge, a Russia expert at the German Institute for International and Security Affairs (SWP), also commented on the claims that Russian economic statistics are not credible. According to the Russian website inosmi.ru, which serves as the “foreign press review” for the state-run media group “Rossiya Segodnya” and provides extensive quotes from the Spiegel interview, Kluge states:

“Overall, I continue to consider Russian economic data informative and suitable for scientific analysis. I see no signs that Russia is systematically falsifying inflation data.”

Kluge argues: If inflation were really as high as the Swedish military intelligence claims—that is, close to the key interest rate—then the yields on Russian government bonds would also have to be significantly higher than they are currently.

Kluge: “I see no compelling reasons for a deep economic crisis”

According to Inosmi.ru, the SWP expert also assesses the general development of the Russian economy much more positively than Nilsson. Kluge says:

“The Russian economy is not on the verge of collapse. For most Russians, the current situation does not feel like an economic crisis. Many have benefited from rising wages in recent years.”…

“Russia is, of course, benefiting significantly from rising oil prices. The price of Russia’s most important crude oil grade, Urals, rose from $45 in February to $95 in April, more than doubling. According to my calculations, Russia earned $10 billion more from oil exports in April than in February. This will improve the budget situation—albeit with a slight delay.”…

“I see no compelling reasons why the Russian economy should fall into a deep crisis in the coming years. While Russia’s long-term growth potential has been reduced by the conflict in Ukraine, and economic activity is currently cooling noticeably. But even if the conflict in Ukraine drags on for a long time, that does not automatically mean problems or economic instability.”

Prof. Dr. Alexander Libman, head of the Politics Department at the Institute for Eastern European Studies at Freie Universität Berlin, also told the Berliner Zeitung: “Economically, Russia is still not in a state of collapse” (as was the case, for example, in the 1990s).

What Russia is experiencing now is the end of the phase of rapid growth following the slump in 2022. “Russia is now clearly in a state of stagnation, possibly even a mild recession,” says Libman.

Kolyandr and Prokopenko: “Russia Has Entered a Recession”

In a commentary for “The Bell,” Alexander Kolyandr and Alexandra Prokopenko argue that the Russian economy has already entered a “recession,” after the Ministry of Economic Development estimated that gross domestic product in the first quarter of 2026 was 0.3% lower than in the first quarter of 2025. A 0.3% decline in the first quarter is “no disaster,” according to Kolyandr and Prokopenko. However, they note:

“The years of fiscal stimulus, fueled by military spending, are finally no longer driving growth. It appears that after a period of overheating, the economy is now reaching its lowest point. While military demand continues to drive growth in the defense sector, civilian industries are stagnating, consumer demand is weakening, and investment is dwindling.”

Kolyandr and Prokopenko point to the following signs of a decline in business activity:

The Central Bank’s business climate index fell into negative territory in February for the first time since 2022.

The Sberindex recorded a 2.2% decline in revenue, also the first since 2022.

The growth in real cash income has slowed from 6.6% to 2.6%. Consumer demand, which has been the main driver of growth so far, is losing momentum.

While the unemployment rate remains close to its historic low of 2.2%, this is not a sign of a healthy economy. Rather, it is a consequence of labor shortages, which are dampening growth potential while simultaneously driving up wages.

Why the Central Bank Revised Its Forecast for the First Quarter So Drastically

On May 7, the Central Bank published a commentary on the update to its “Medium-Term Forecast” for the Russian economy, which was released in conjunction with the latest key interest rate decision. The commentary includes the following table on quarterly gross domestic product trends. The bottom two rows document the central bank’s downward revision of its economic growth forecast for the first quarter of 2026 from +1.6% to -0.5%.

Short-term quarterly trends
in inflation and real gross domestic product;
year-over-year changes in percent

Note: The rows with blue figures show the data and the Central Bank’s estimates or forecasts for inflation and growth as of February 13, 2026
Russian Central Bank: Commentary on the Central Bank of Russia’s medium-term forecast; May 7, 2026

The Central Bank justifies the reduction of its forecast for annual economic growth in the first quarter of 2026 from +1.6% to -0.5% by citing the “calendar effect” and unfavorable weather conditions. In summary, it argues as follows: January and February 2026 had a total of three fewer working days than January and February 2025. The impact of the lower number of working days was estimated to be somewhat lower in the Central Bank’s February forecast than in the new forecast. In addition, there were unexpectedly unfavorable weather conditions in the first quarter that hampered production in some sectors, including construction.

The GDP forecast for the full year 2026 remains unchanged at 0.5 to 1.5%

For the second quarter of 2026, the Central Bank expects a recovery in economic activity with GDP growth of 0.9%. The second quarter has three more working days than the second quarter of 2025. The “calendar effect” will then have a positive impact. The Central Bank also notes that there are signs of a recovery in production in March and April. Business sentiment assessments for April are approaching the levels seen in the third and fourth quarters of 2025.

Taking these factors into account, the Central Bank maintains its forecast that the Russian economy will grow by a “moderate” 0.5 to 1.5% in 2026. Subsequently, GDP growth is expected to reach 1.5 to 2.5%, in line with long-term estimates of the Russian economy’s production potential (“Medium-Term Forecast” dated April 24, 2026).

In the following Central Bank chart on gross domestic product trends, the gray bars indicate that the Central Bank expects GDP to rise by 0.9% in the second quarter following a 0.5% decline in the first quarter of 2026. The blue dots indicate the forecast ranges in the Central Bank’s “Medium-Term Forecast” for the years 2026, 2027, and 2028. The black dots show, among other things, the decline in real gross domestic product growth from 4.9% in 2024 to 1.0% in 2025.

Real Gross Domestic Product
Annual Changes in Percent

Russian Central Bank: Commentary on the Central Bank of Russia’s Medium-Term Forecast; May 7, 2026

The Central Bank did not change its inflation forecasts

Regarding consumer price trends, the Central Bank states in its commentary:

The inflation rate stood at 5.9% in the first quarter of 2026, slightly below the Central Bank’s February forecast (6.3%; see table above). This is attributable to weaker domestic demand and lower price increases for some volatile components than expected in the February forecast.

The central bank expects the annual inflation rate to fall to 4.5–5.5% in December 2026 and to return to the target level of 4% in December 2027 (blue dots in the figure below). By December 2025, the inflation rate had already fallen to 5.6% (see black dot in the figure).

Year-over-year increase in consumer prices in percent; black and blue dots: annual inflation rate in December

Russian Central Bank: Commentary on the Russian Central Bank’s medium-term forecast; May 7, 2026

The Central Bank raised its key interest rate forecasts slightly

In February, the Central Bank had still expected its key interest rate to fall to an annual average of 13.5% to 14.5% in 2026. In April, however, it raised its forecast for the average key interest rate range slightly to 14.0% to 14.5%. For the annual average in 2027, it raised its key interest rate forecast from 8.0% to 9.0% to 8.0% to 10.0% (see blue dots). As a reason for now expecting a “slightly more cautious path of interest rate cuts” than in its February forecast, the central bank cites inflation risks expected from developments in “external conditions” and the government budget. In 2028, the central bank continues to expect the key interest rate to return to the “neutral range” of 7.5 to 8.5% per year.

Key interest rate in percent per year

Bank of Russia: Commentary on the Bank of Russia’s Medium-Term Forecast; May 7, 2026

How GDP allocation is expected to develop

The Central Bank has also published forecasts on the development of the use of aggregate economic output. The key findings:

Consumption: The forecast for the development of real consumer spending remains unchanged. It continues to assume that the 2.9% growth in total private and government consumption reached in 2025 will slow to a more moderate rate of 0.5% to 1.5% in 2026. This is due, among other things, to the fact that a portion of consumer demand was brought forward to the second half of 2025 in anticipation of the increase in the value-added tax rate from 20% to 22%, which took effect in early 2026. For 2027 and 2028, the central bank expects consumption to return to growth rates of 1.5 to 2.5%.

Private consumption (red bars) and public consumption (pink bars) thus remain by far the most important drivers of economic growth.

Use of real gross domestic product,
year-over-year GDP changes in % (dark line),
growth contributions of expenditure categories in percentage points (colored bars)

red bar: Private consumption; pink bar: Government consumption;
dark blue bar: Gross fixed capital formation;
light blue bar: changes in inventories;
green bar: net exports; dark line: year-over-year GDP changes in %;
red dots: domestic demand; % year-over-year

Gross investment: The forecast range for gross investment was also maintained. It remains at 1.0 to 3.0% annually for the years 2026 to 2028. In 2025, gross investment fell unexpectedly sharply by 4.9% (Rosstat’s initial estimate: -3.0% year-on-year). Looking ahead, the Central Bank expects a recovery in investment activity, with inventory changes making a positive contribution to GDP.

Rosstat lowered its estimate for the year-over-year change in gross fixed capital formation (GFCF) in 2025 from +1.7% to -0.4%. In light of monetary policy easing, the Central Bank of Russia forecasts a slight recovery in investment activity compared to the previous year. It therefore maintains its forecast range for gross fixed capital formation growth of 0.0% to 2.0% for 2026. For 2027 and 2028, it expects steady investment growth of 1.0 to 3.0% per year, partly due to the implementation of infrastructure projects.

Net exports: The central bank left its export and import forecasts unchanged.

Real export growth of 0.5 to 2.5% is still expected for 2026. The forecast for import growth also remains at 0.5 to 2.5%. In 2027 and 2028, exports and imports are still expected to grow by 1.0 to 3.0%.

Recommended reading:

German-Russian Chamber of Foreign Trade:
Analyses, German; also Russian; (selection):
The Druzhba Pipeline – once a symbol of friendship, now a bone of contention, 05/06/26
Income and Prosperity: Are Russians better off than before? 04/30/26
Background and commentary on the key interest rate decision, 04/28/26

Forecasts: