Russian Industry Plunged Into Recession
- 10.02.2026, 17:53
Even Rosstat has recognized this.
After two years of military boom, paid for by record budget spending on the army since Soviet times, the Russian economy is sinking deeper into the swamp of industrial recession, writes The Moscow Times.
Of 28 major industries, 21 finished last year in the negative, according to Rosstat data. At year-end, mineral extraction fell by 1.6%, gas production by 3%, and oil production fell to a 16-year low.
In the non-resource sector, metallurgists cut output by 2.1%, clothing and footwear factories by 3.5%; for the first time in 15 years, food production fell by 0.5%. The output at oil refineries, which were hit dozens of times during the year by UAV strikes, decreased by the same amount.
In general, according to Rosstat, industry remained in the plus - by 1.3%. However, only seven industries showed growth, and of them three related to the defense sector, notes Finam economist Olga Belenkaya: these are the production of "finished metal products" (+18%), "computers, electronics and optics" (+11.7%), as well as "production of other vehicles and equipment" (+32%). Such dynamics reflects "increasing pressure from weak domestic demand and high interest rates," explains Freedom Finance analyst Vladimir Chernov.
"The growth model based on military spending alone is broken," states Janis Kluge, an expert at the German Institute for International Security Affairs. Russia's GDP growth rate has slowed more than fourfold, to 1%, and the budget's ability to pump money into the economy is nearing exhaustion. Due to the fall in oil and gas revenues, the federal treasury ran a deficit of 5.7 trillion rubles last year, and this year the "hole" may increase to 8-10 trillion rubles.
The government recognizes that the military boom in the economy has reached its ceiling. After growing by tens of percent a year in 2023-25, military industries will add only 4-5 percent this year, according to a macro forecast by the Ministry of Economic Development. "Government spending has reached levels that can be considered marginal for the current state of the Russian economy," said Alexander Shirov, director of the Institute of National Economic Forecasting at the Russian Academy of Sciences.
The first operational data for January point to a further weakening of economic activity, Belenkaya points out: in surveys, businesses complain of rising costs, worsening demand, higher taxes and persistent staff shortages.
To this can be added the drop in Russian oil prices to $40 per barrel, and the strengthening of U.S. and EU sanctions, Belenkaya continues. According to The Washington Post, government finance officials are already sounding the alarm and warning Vladimir Putin of an imminent economic crisis, which they estimate could begin next summer.
They believe the budget deficit will continue to grow without further tax increases because of falling oil and gas revenues and problems with oil exports to India, the WaPo source said. "Deteriorating conditions for Russian oil exports, the effects of tight monetary policy and reduced fiscal impetus are expected to contribute to subdued growth in the Russian economy," Belenkaya forecast. She estimates that GDP will add 1-1.2% this year.