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Russia  ·  Chronicles · Klaus Dormann

"Near-Stagnation": Russia's GDP Grew by Only 0.3% in the First Half of the Year

August 3, 2026  ·  19 min read  ·  By Klaus Dormann  ·  Original (German)
"Near-Stagnation": Russia's GDP Grew by Only 0.3% in the First Half of the Year

Author: Klaus Dormann

On July 29, Rosstat, Russia’s Federal State Statistics Service, released preliminary data on economic performance for the first half of 2026. Based on this data, the Russian Ministry of Economic Development estimates that real gross domestic product rose by only 0.3% year-over-year in the first half of the year.

In light of this weak growth, many forecasts for the Russian economy’s growth in 2026 are being further revised downward. Vasily Astrov, a Russia expert at the Vienna Institute for International Economic Comparisons (wiiw), emphasized in a podcast that the Russian economy is in a state of “stagnation.” Astrov noted that the forecast for this year’s Russian economic growth—which the wiiw had lowered to +0.6 percent in early July—would likely now be revised “toward zero.”

The Institute for Economic Forecasting at the Russian Academy of Sciences even believes that only the effects of the war in Iran will save Russia from a recession this year.

Olga Belenkaya, chief economist at the brokerage firm FINAM, expects real gross domestic product to grow by only 0.3 to 0.8 percent in 2026. She has conducted a detailed analysis of production trends in the key economic sectors during the first half of the year (see table at the end of this article).

The Central Bank, Sberbank, and VTB Bank have also lowered their GDP forecasts

Since mid-May, the Ministry of Economic Development has been forecasting that economic growth for the full year 2026 is likely to slow from 1.0% to just 0.4%. Previously, in its fall 2025 budget, the government had assumed that GDP growth would accelerate slightly to 1.3% this year.

Meanwhile, the Russian Central Bank has also shifted its growth expectations for 2026 toward “stagnation.” In its July policy rate decision, it lowered its forecast range for this year’s GDP growth to 0.0–1.0%.

Major Russian state-owned banks followed suit. Sberbank lowered its GDP forecast for 2026 from 0.5 to 1.0% to 0.0 to 0.5% (Vedomosti). VTB Bank lowered its forecast for real GDP growth from 1.0% to 0.6% (1prime.ru).

The Institute for Economic Forecasting of the Russian Academy of Sciences (IEF-RAS) continues to expect 0.7% growth

In its forecast published at the end of July, the Institute for Economic Forecasting of the Russian Academy of Sciences (IEF-RAS) maintains the similarly low growth expectations it had already published in early June. It anticipates that real gross domestic product growth will slow to 0.7% in 2026 and will be only slightly higher at 1.1% next year (GDP, first row of the table below).

IEF-RAS: Prognose der makroökonomischen Kennziffern Russlands 2026 bis 2029

IEF-RAS: Quarterly Forecast of Macroeconomic Indicators of the Russian Federation, excerpt; July 30, 2026

According to the forecast, the drivers of growth in 2026 will be private household consumption (+1.8%) and government consumption (+1.0%). Gross fixed capital formation, on the other hand, will decline (-1.2%). Nor is any growth impetus expected from the “external sector.” Exports are rising more slowly (+1.4%) than imports (+3.3%).

IEF-RAS: Russia Will Be Spared a Recession in 2026 Due to the War in Iran

In the summary of its forecast, the IEF highlights the following thesis:

“The change in external conditions will spare the Russian federal budget from cuts and the Russian economy from a recession.”

The institute’s explanation of this thesis indicates that by “changes in external conditions,” the institute refers to the rise in export prices for Russian commodities as well as the increase in demand for Russian commodities resulting from the closure of the Strait of Hormuz due to the war in Iran. According to the institute, this has most likely prevented the onset of an “unfavorable scenario” for the Russian economy. In this “adverse scenario,” the government would have been forced to cut its budget spending quite sharply as early as 2026 due to declining oil and gas revenues. A simultaneous “controlled devaluation” of the ruble to further increase state oil and gas revenues would not have been able to prevent this.

The institute explains:

“The growth in export revenues and the stabilization of oil and gas revenues make it possible to meet this year’s planned deficit targets without reducing budget expenditures and without postponing the resolution of the budget balancing issue until 2027.”

According to the institute’s assessment, the “problem of balancing the budget” will therefore soon arise again. In its forecast, the institute assumes that the blockade of the Strait of Hormuz will be lifted in the second half of 2026. This will be accompanied by a decline in export prices and stagnation in foreign exchange earnings from exports from 2027 to 2029.

The institute also assumes that monetary policy will “gradually normalize.” The inflation rate will remain steadily above the central bank’s target of 4 percent due to a gradual devaluation of the ruble and inflationary pressures exceeding the growth of consumer demand.

wiiw expert Astrov plans to lower his Russia forecast “toward zero”

As early as the beginning of July, the “Vienna Institute for International Economic Comparisons (wiiw)” had already forecast a very similar trend in Russian economic output to that of the Institute for Economic Forecasts of the Russian Academy of Sciences (RAS) (see “Country Overview Russia”). Just over a month ago, it lowered its growth forecast for 2026 by another 0.3 percentage points to just 0.6% (IEF forecast: 0.7%). Next year, the wiiw expects growth to pick up to 1.3% (IEF forecast: 1.1%).

However, Vasily Astrov, the wiiw’s Russia expert, stated in late July during an interview with Eduard Steiner on the Russia podcast of the Austrian newspaper “Die Presse” that he would now lower his growth forecast for Russia even further (minute 17:30).

In the interview, Astrov does reiterate that he would not describe the current situation of the Russian economy as an “acute crisis.” An acute crisis typically involves a “spike in inflation,” a currency devaluation, or a double-digit or “significant” decline in GDP. According to Astrov, we are not seeing any of that in Russia at the moment. It is more a case of “stagnation.” Incidentally, he would now set his forecast for this year’s growth of the Russian economy even lower (“probably closer to zero”). “Either way,” he says, Russia is in a state of “stagnation.”

VEB Institute Estimate: GDP Grew in June

The research institute of the state-owned development corporation VEB has calculated, based on Rosstat figures, how real gross domestic product developed month-over-month on a seasonally and calendar-adjusted basis during the first half of the year. According to its estimate, GDP grew by 0.3% in June 2026 compared to the previous month, May.

Index of real gross domestic product,
seasonally and calendar-adjusted (Jan. 2014=100)

VEB-Institut: Index des realen Bruttoinlandsprodukts Russlands, saison- und kalenderbereinigt

VEB Institute: Global Economic and Market Outlook (July 24–30, 2026), July 31, 2026

Regarding production trends across economic sectors, the VEB Institute notes: The main driver of growth in June was the construction sector. Freight transport, electricity, gas, and water supply, as well as wholesale and retail trade, also performed well. Mining, manufacturing, passenger transport, agriculture, the restaurant industry, and services, on the other hand, recorded a decline in production in June compared to May.

Compared to the same month last year (June 2025), GDP growth accelerated to 1.2% according to the VEB Institute’s estimate, slightly higher than the Ministry of Economy’s estimate (+1.1%; Interfax). In the second quarter of 2026, GDP rose by 0.9% year-over-year, according to both the VEB Institute and the Ministry. When comparing figures with the corresponding quarters of 2025, the impact of the “calendar effect” should be taken into account. In the second quarter of 2026, there were three more working days than in the same quarter of the previous year. In the first quarter of 2026, however, the number of working days was three days fewer than a year earlier.

BOFIT: “Mild Recovery” of the Economy After a “Weak Start” to 2026

The BOFIT research institute of the Bank of Finland, which focuses primarily on developments in the “emerging economies” Russia and China, notes in its latest weekly report, “BOFIT Weekly,” that Russia’s gross domestic product (GDP) fell by 0.2% year-over-year in the first quarter of 2026.

At the same time, the institute notes that, according to Rosstat, output in the five key economic sectors grew by 0.2% year-over-year from January through June (see also Finmarket.ru). According to BOFIT, this increase in the five “core sectors” of the economy (agriculture, industrial production, construction, freight transport, and wholesale and retail trade) indicates that overall economic output has “rebounded slightly” following a “weak start to the year.”

In fact, according to estimates by the Ministry of Economic Development, real gross domestic product grew by 0.9% year-over-year in the second quarter (RBC). However, due to the 0.2% decline in the first quarter, GDP for the first half of the year as a whole rose by only 0.3%, according to the ministry.

Growth in the first half of the year was driven primarily by the industrial sector

In its weekly report, BOFIT comments on the Rosstat data for the entire first half of 2026 as follows, among other things:

Growth in the first six months was driven primarily by industrial production. It rose by a total of 0.4% (Finmarket.ru). The increase was based almost exclusively on the rise in the production of defense-related goods in the “manufacturing sector.”

Specifically:

  • “production of other transportation equipment” by about 32%,
  • “production of other metal products” by 9%,
  • “production of computers and optical equipment” by 4%,
  • and “production of pharmaceutical products” by 14%.

Production in other sectors of the “manufacturing industry” as well as in mining declined slightly in the first half of the year.

The growth in industrial production has slowed in recent years

The following BOFIT chart shows the monthly trend in total industrial production and its two largest subsectors: “Mining and quarrying” and “Manufacturing.”

Industrial growth has slowed
Year-over-year changes in production (in %) for total industry, “Mining and Quarrying,” and “Manufacturing”

BOFIT: Entwicklung der russischen Industrieproduktion, Bergbau und Verarbeitendes Gewerbe

BOFIT, Bank of Finland: BOFIT Weekly, July 30, 26

Overall, industrial production rose by 0.6% in June 2026 compared to June 2025 (middle dark blue line). Production in the “Mining and Quarrying” sector, however, declined again (-2.4%; lower green line). Production in “Manufacturing,” on the other hand, rose by 2.6% year-over-year in June (upper black line).

BOFIT notes that the production losses caused by Ukraine’s drone attacks are particularly evident in the decline in “Production of Coke and Petroleum Products.” Here, production in June fell by about 12% compared to the previous month, May. It was 22% below the level reached one year ago in June 2025.

According to BOFIT, significantly higher real sales in the retail sector (+5.4%) and in the hotel and restaurant industry (+6.1%) also made strong contributions to overall economic growth in the first half of the year. However, the growth rate of other private services (+2.6%) slowed slightly.

An Overview of the Key Sectors’ Performance

Olga Belenkaya, chief economist at the publicly traded company FINAM, has once again compiled a detailed analysis of how the key economic sectors have performed over the past month and since the beginning of 2026. The following table also allows for a comparison with the economic situation one year ago, in June 2025.

Economic Indicators for June 2026 Compared to June 2025
Year-over-year changes in June 2026 and the first half of 2026, in %

  June 2026 /
June 2025		 June 2025 /
June 2024		 Jan.–June 2026 /
Jan.–June 2025		 Jan.–June 2025 /
Jan.–June 2024
Total industrial production 0.6 2.1 0.4 0.8
Mining -2.4 -1.1 -0.5 -2.8
Manufacturing 2.6 4.5 0.7 3.7
Wholesale trade 2.7 -2.9 1.0 -3.5
Transportation Industry, Freight Handling 1.9 1.5 -0.6 -0.3
Construction output 3.5 0.0 -5.0 3.5
Agricultural production -2.9 1.5 -0.8 1.1
Retail/Services, Real Sales 6.0   4.8  
Total retail 7.3 3.4 5.4 3.1
Food retail 4.6 2.2 3.1 2.2
Non-food retail 9.8 4.6 7.6 3.8
Paid services 1.7 3.3 2.6 3.1
Hospitality 6.5   6.4  

Wage income, nominal and real

  May 2026 /
May 2025		 May 2025/May
2024		 Jan.–May 2026 /
Jan.–May 2025		 Jan.–May 2025/
Jan.–May 2024
Average nominal wage 10.1 14.5 13.3 14.3
Average real wage 4.5 4.2 7.2 3.8

Source: Olga Belenkaya; Finam.ru: Results for June and the first half of 2026; July 30, 2026

Olga Belenkaya: “The sustainability of consumption growth is uncertain”

In her analysis, Belenkaya takes a close look at consumer spending trends, among other things. She notes:

According to the Ministry of Economy, real total sales in retail, consumer services, and the food service industry rose by 6.0% year-over-year in June 2026. In the first half of 2026, growth in these consumer activities amounted to 4.8% compared to the previous year (+6.0% in the second quarter of 2026).

Annual growth in total retail sales slowed slightly in June compared to May, reaching 7.3%. Food sales rose by 4.6%, while non-food sales increased by 9.8% year-over-year—roughly twice as much.

However, commenting on these strong growth rates, Belenkaya notes: “The sustainability of this growth in consumer spending is uncertain.” She points out that wage growth has slowed.

Recommended Reading

German-Russian Chamber of Foreign Trade

“Die Presse” Podcast: Russia – Gas, Sanctions, Oligarchs

  • Has Ukraine finally struck a vital nerve in the Russian economy? Following the oil refineries, Ukrainian drone attacks are now setting fire to the logistics warehouses of Russia’s largest online retailer, Wildberries. Hundreds of thousands of business owners are affected. How badly has the economy been hit? Economist Vasily Astrov (WIIW) in conversation with Eduard Steiner; 47 min., July 29, 26
  • “Will Ukrainian drones be the ones to bring down Putin?” Former Colonel Wolfgang Richter and economist Vasily Astrov (WIIW) discuss with Eduard Steiner how far Ukraine has advanced in weapons technology, the risk of escalation the West is currently sliding into with Russia, and how much of the Russian oil industry has already been destroyed (min. 18–34); 49 min., July 15, 2026

Current economic trends in June and the first half of the year; the economy as a whole

Economic Forecasts

Fuel Supply, Energy Sector

Price Trends

Monetary Policy: Reports on the Key Interest Rate Cut on July 24

Monetary Policy; Russian Central Bank: Key interest rate cut from 14.25 to 14.0 percent and new forecasts

Fiscal Policy; National Budget

Foreign Trade, Sanctions

Political Context

Translated from the German original published on ostwirtschaft.de, August 3, 2026.