Russia GDP Contracts for 1st Time in 3 Years

The Russian GDP contracted by 0.2% from the previous year in the first quarter of 2026, aligned with the preliminary estimate to confirm the first annual decline since the first quarter of 2023. Output contracted for manufacturing (-1.5%), professional, scientific, and technical activities (-6.1%), and transportation and storage (-1.8%). The data was aligned with the government's downgrade of the year's expected GDP to 0.4% from an earlier estimate of 1.3%. The downturn occurred despite a sharp rise in the prices of key Russian exports, including oil, natural gas, coal, industrial metals, and grains, following disruptions to Middle Eastern shipping routes caused by the war. Economic activity also weakened even as the Duma ramped up deficit spending in an effort to support an economy still constrained by Western sanctions, which continue to isolate Russian producers and financial institutions from international markets.

Russia’s economy contracted by 0.2% year-on-year in the first quarter of 2026, marking its first annual decline in three years and reversing from a 1% expansion in the previous quarter. The data came just days after the Russian government downgraded its full-year GDP growth forecast to 0.4% from an earlier estimate of 1.3%. The downturn occurred despite a sharp rise in the prices of key Russian exports, including oil, natural gas, coal, industrial metals, and grains, following disruptions to Middle Eastern shipping routes caused by the war. Economic activity also weakened even as the Duma ramped up deficit spending in an effort to support an economy still constrained by Western sanctions, which continue to isolate Russian producers and financial institutions from international markets. Meanwhile, Russia’s energy revenues fell by 40% year-on-year in the 12 months through April, while interest rates set by the Bank of Russia are expected to remain elevated.

The Russian GDP expanded by 1% in real terms from the previous year in the fourth quarter of 2025, picking up from the 0.8% expansion in the previous quarter, which was the slowest growth rate since 2023. The figure confirmed that Russia's economy significantly underperformed 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.