Russian GDP Slows Further

Russia’s GDP grew 0.6% YoY in Q3 2025, the weakest pace since 2023, slowing from 1.1% in Q2, in line with preliminary estimates. The slowdown reflects the Kremlin’s focus on military spending amid the Ukraine war, rather than investments to stimulate the economy, combined with low oil prices, weaker natural gas exports due to European sanctions, muted trade with China, and a strong ruble supported by high Bank of Russia interest rates. Manufacturing growth eased to 1.4% from 3.8%, construction to 1.4% from 2.7%, and hotels & catering to 8.6% from 9.2%. Mining contracted -0.7% (vs -1.2%), water & waste activities -3.6% (vs -3.9%), wholesale & retail -1.1% (vs -2%), transportation -1.7% (vs 0.8%), and real estate -0.7% (vs -0.4%). Agriculture, forestry, hunting, fishing, and fish farming outperformed at 3% (vs 0.8%).

The Russian GDP expanded by 0.6% in real terms from the previous year in the third quarter of 2025, slowing from the 1.1% expansion in the previous quarter to mark the slowest rate of growth since 2023. The figure was aligned with the IMF's projection that the Russian economy may grow around 0.6% this year, significantly underperforming other emerging markets as the Kremlin's prolonged invasion of Ukraine allocated government spending in the military instead of investments that stimulate the economy. Low crude oil prices, softening natural gas exports due to European sanctions, muted trade with China due to their anti-involution campaign, and a strong ruble amid soaring interest rates by the Bank of Russia also pressured the Russian economy.

Russia’s GDP grew 1.1% in Q2 2025, slowing sharply from 4% a year earlier, preliminary estimates showed. The economy, boosted last year by soaring defence spending despite Western sanctions, now faces cooling growth and rising recession risks. High interest rates aimed at curbing stubborn inflation are weighing on activity. President Putin rejects claims the Ukraine war is crippling the economy, pointing to low debt and diversification. After 4.3% growth in 2024, the central bank expects only 1–2% this year, while the economy ministry may revise its 2.5% forecast.