Russia GDP Rebounds in Q2

Russia’s economy expanded by 1.3% year-on-year in the second quarter of 2026, rebounding from a 0.2% contraction in the previous quarter and marking the strongest growth since the third quarter of 2025, preliminary estimates showed. The result exceeded forecasts from the Central Bank and Economy Ministry of 0.8% and 0.9%, respectively, with stable domestic demand and stronger consumer activity driving the recovery. Retail turnover rose 7.2% year-on-year, helping offset pressures from Ukrainian drone strikes on Russian oil refineries and e-commerce warehouses. Nevertheless, the economy continues to face high borrowing costs, labor shortages, inflation and Western sanctions, while the Bank of Russia has kept its key interest rate elevated at 14%. The central bank recently lowered its full-year GDP growth forecast to 0-1% from 0.4-1.3%, highlighting persistent structural pressures despite the stronger second-quarter performance.

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.