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Russia  ·  Chronicles · Klaus Dormann

The Russian government expects growth of just 0.4 percent in 2026

May 18, 2026  ·  12 min read  ·  By Klaus Dormann  ·  Original (German)
The Russian government expects growth of just 0.4 percent in 2026

Author: Klaus Dormann

On May 12, Russia’s Ministry of Economic Development unexpectedly slashed its forecast for this year’s economic growth. It now expects real gross domestic product to grow by only 0.4% in 2026. As recently as last September, the government had still projected economic growth of 1.3 percent in its budget planning.

The main reason for the sharp downward revision of the forecast is likely to have been the weak production performance in the first quarter of 2026. The Ministry of Economic Development itself estimated that overall economic output in the first quarter was 0.3% lower than a year ago. Meanwhile, the Federal State Statistics Service (Rosstat) has estimated the decline at 0.2% in a preliminary assessment.

According to Interfax, the Ministry’s forecast cites “monetary policy conditions” that are now more restrictive as one reason for the deterioration in growth prospects since fall 2025. The Central Bank’s key interest rate forecast for 2026 now stands at 14.0 to 14.5%. In September 2025, the Central Bank had still anticipated lower key interest rates of 12.0 to 13.0% for 2026.

Few expect growth in 2026 to be as weak as the government does

With the reduction of its growth forecast for 2026 from 1.3% to 0.4%, the government’s forecast slips just below the Russian Central Bank’s forecast range, which spans 0.5% to 1.5%. The government’s forecast is now also lower than the growth expectations of major international economic organizations. For instance, as recently as mid-April, the IMF raised its forecast for Russian economic growth to 1.1%.

Participants in a Russian Central Bank survey also expected an average increase in aggregate economic output of 1.0% for this year as of mid-April. In the monthly analyst survey conducted by the Interfax news agency, participants also revised their growth forecasts downward, but on average only from 1.0% to 0.8% for 2026 and from 1.7% to 1.6% for 2027. The lowest growth forecast for 2026 in the Interfax survey, at 0.3%, was barely lower than the government’s new forecast of 0.4%.

The Vienna-based OPEC Secretariat, however, maintained its assessment in the “Monthly Oil Market Report” on May 13 that the Russian economy is likely to grow by 1.3% in 2026 and 1.5% in 2027. The state-owned Russian PSB Bank even expects the Russian economy’s growth to accelerate from 1.0% in 2026 to 2.5% in 2027. This would place Russia’s growth next year at the upper end of the Russian Central Bank’s forecast range for 2027 (1.5% to 2.5%).

GDP Forecasts for Russia 2024–2027
Year-over-year change in real gross domestic product, in percent

The government also significantly lowered its growth forecasts for 2027 to 2029

According to the new government forecast, Russia’s GDP growth in 2027 will remain at 1.4%, just below the Central Bank’s growth expectations (1.5% to 2.5%). Previously, the Ministry of Economic Development had projected twice as much growth—2.8%—for next year (see the last row of the table above).

However, according to the Ministry of Economic Development’s new forecast, the economy will not even reach this growth rate by the end of the planning period. In 2028, annual GDP growth is expected to rise to 1.9%, and to 2.4% in 2029. This is shown by the light red line in the following excerpt from a chart by the German-Russian Chamber of Foreign Trade.

Infographic from the German-Russian Chamber of Foreign Trade:
The Ministry of Economic Development has revised its GDP forecast downward,
May 14, 2026

However, the economy will grow over the entire forecast period

According to Interfax, a representative of the Ministry of Economic Development commented on the new growth forecasts:

“Above all, we continue to expect positive economic growth throughout the forecast period. We also do not believe that GDP will slip into negative territory in 2026. A decline in a single month or quarter—as may have occurred in the first quarter—is entirely to be expected, and the Central Bank has warned of this. Overall, however, we expect growth of around 0.4 percent for the year… .”

Government: Positive Effects of the Iran Crisis Are “Virtually Nonexistent”

Although Russia is often described by many observers as a “beneficiary” of the Iran crisis, according to the spokesperson for the Ministry of Economy, “positive effects of the crisis in the Strait of Hormuz on the Russian economy” are, in the ministry’s assessment, “practically nonexistent.” In the short and medium term, there may indeed be price increases. However, it is now evident that these have remained below the forecasts of some analysts at the start of the crisis. And as for the increase in Russian export volumes, the effects are “not that significant.”

Comparison of some new government forecasts with its previous forecasts

Denis Popov, chief analyst at the state-owned Promsvyazbank (Wikipedia), uses the following table to illustrate how the government’s expectations regarding economic growth, inflation, oil prices, and exchange rates have changed.

Growth: The white numbers in the first row of the tables show the reduction in the government’s forecasts for annual GDP growth rates compared to its previous forecasts (red numbers). Popov himself stands by his assessment that the Russian economy will grow by 1.0% again in 2026 (see blue figures in the table). He points to the potential for accelerated growth in exports and consumption and expects economic growth to accelerate to 2.5% next year.

Inflation: The ministry no longer expects Russia’s inflation rate to drop to just 4.0% as early as December 2026. It now anticipates that the rise in consumer prices will still reach 5.2% by year-end. Finam.ru; Denis Popov, Chief Analyst at PSB:
The risks of continued economic stagnation into 2027 are high, May 14, 2026. The Central Bank will not reach its inflation target of 4.0% until the end of 2027.

Forecasts for GDP growth, inflation, oil prices, and the ruble exchange rate in comparison
white figures: May 26 government
forecasts red figures: September 25 government
forecasts blue figures: current PSB forecasts

Finam.ru; Denis Popov, Chief Analyst at PSB:
The risks of continued economic stagnation into 2027 are high, May 14, 2026

Oil price: In its new forecast, the Ministry confirmed its September forecast for the average price of Urals crude oil in 2026 at $59 per barrel. However, it lowered its forecast for 2027 from $61 to $50.

Ruble exchange rate: According to the Ministry, the ruble will appreciate slightly on an annual average in 2026, reaching 81.5 rubles per U.S. dollar (down from 83.4 rubles per U.S. dollar in 2025). For 2027, however, the ministry expects the ruble exchange rate to weaken to an average of 87.4 rubles per U.S. dollar. In September 2025, the ministry had anticipated a more significant depreciation of the ruble.

What the optimistic PSB analyst Popov expects from the economy

Denis Popov explained to Vedomosti why he—unlike the government—is sticking to his forecast that the Russian economy is likely to grow by 1.0% again in 2026. Over the next two years, growth could accelerate to 2 to 2.5%, according to Popov. He expects economic activity to recover starting in the second half of the year, as monetary easing will take effect more strongly by then.

Furthermore, in his view, “external factors” significantly limit the “risk of recession” for Russia this year. Popov expects a significant increase in oil and gas revenues. The state budget situation will improve.

The chief analyst points to leading indicators signaling increased demand in sectors with a high proportion of foreign customers and in the production of intermediate goods. For instance, freight transport by Russian railways has picked up again.

Popov notes that the Ministry of Economic Development is “rather cautious” in its assessment of the positive effects of the global energy crisis on Russia. The ministry’s forecast for goods exports in 2026 is significantly below the estimates of the Russian Central Bank and the PSB. The Ministry expects exports of only $442 billion. The forecasts of the Central Bank ($485 billion) and the PSB ($490 billion) are about one-tenth higher.

Taken together, these developments would allow for a limited decline in fixed investment and further growth in household income.

Popov considers the government’s forecast for real wage growth (+2.2% in 2026) to be too low. In January and February, real wages rose by 8.9% year-over-year, significantly exceeding most forecasts.

Alfa Bank: The government expects a further slowdown in growth in 2026

According to an analysis by Moscow-based Alfa Bank, the government expects a further economic slowdown in 2026, as indicated by the following indicators:

Production: GDP growth will reach only 0.4% in 2026. Industrial production will grow by 0.6%, significantly more modestly than previously expected (fall forecast: +2.3%).

Labor market: Despite the expected economic slowdown, the unemployment rate forecast is lowered from 2.6% to 2.4%. This indicates that the labor shortage is structurally driven.

Investment: Corporate earnings have fallen for the second consecutive year in 2025, making investment in the real sector unattractive. Investment in fixed assets will decline by 1.5% in 2026 (Autumn Forecast: –0.5%). This marks the second consecutive decline.

Consumption: Consumer demand will also weaken in 2026.
Real disposable income will rise by 0.8% (autumn forecast: 2.1%).
Real wages will increase by 2.2% (autumn forecast: 2.4%).
Retail sales will rise by 0.8% (autumn forecast: 1.1%).
Saving behavior will support consumption:
The savings rate will fall from a record high of 16.6% to 14.3%.

Foreign trade: The trade surplus will increase by $16.5 billion to $133.6 billion in 2026. The main reason is the growth in oil and gas exports.

From 2027 to 2029, the government expects growth to accelerate

GDP growth will accelerate from 1.4% in 2027 to 2.4% in 2029. The inflation rate will reach the central bank’s target of 4.0% by the end of 2027. The unemployment rate will stabilize at 2.3%.

Investment will pick up again in 2027 (+2.0%). However, the decline in investment in 2025 and 2026 will not be fully recovered until 2028.

Consumption growth will also accelerate, although the forecast here is significantly more moderate than in September: The increase in real disposable household income will accelerate from 2.1% in 2027 to 2.7% in 2029, while the rise in real wages will increase from 2.5% to 3.0%. Retail sales growth will rise to 3.1% by 2029.

Infographic from the German-Russian Chamber of Foreign Trade:
The Ministry of Economic Development has revised its GDP forecast downward,
May 14, 2026

An analysis by the Moscow-based “Intersectoral Expert Center” provides detailed tables comparing the Ministry of Economic Development’s new forecasts with those of the Central Bank, as well as the Ministry’s previous forecasts from September 2025. The Center’s report also compares the forecasts in the Ministry of Economic Development’s “base scenario” with those in its “risk scenario.”

Recommended reading:

New forecasts:

Politics and Economy in Russia:

Translated from the German original published on ostwirtschaft.de, May 18, 2026.

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