In the first quarter, the Russian economy shrank for the first time since the beginning of 2023, which is a blow to President Vladimir Putin's call for continued economic growth amid the war in Ukraine, Bloomberg reports.
In the first quarter, Russia's GDP fell by 0.2% on an annual basis - the first decline since the beginning of 2023. This increases the risk of recession amid expensive loans, although one-off factors explain some of the decline. Putin reported economic growth of 1.8% in March, after a decline in February.
The Russian Central Bank believes this is more of a “weakening of headwinds rather than a sustained acceleration“. The economic calendar (fewer working days, down by up to 0.5 percentage points from the annual rate) and a harsh winter that disrupted construction weighed on the growth rate.
The economy ministry cut its growth forecast for 2026 from 1.3% to 0.4%. The budget deficit hit a record in April and has already exceeded the annual target in the first four months, despite rising oil revenues amid tensions in the Middle East.
The key interest rate was cut after peaking at 21% in 2024, but remains high at 14.5%. Tax hikes dampened demand in early 2026, although retail sales accelerated by over 6% in March. Oil revenues are helping, but they are unlikely to quickly revive the slowing economy.
Earlier, Russia's Federal Antimonopoly Service began warning analysts not to publicly predict rising commodity prices.
“Such forecasts could be perceived by market participants as an incentive to adjust prices, and also provoke increased consumer demand“, the FAS press service explained.