The Academy Of Sciences Said The Russian Economy Is In Its Strongest Decline In Three Years
- 8.04.2026, 14:26
Even experts close to the Kremlin recognize the problems.
The Institute of National Economic Forecasting of the Russian Academy of Sciences (INP) has estimated a 1.5% decline in the physical volume of GDP in the first quarter compared to January-March last year. If its estimate is correct, this is the economy's first quarterly decline since the beginning of 2023, when Q1 GDP was 1.9% lower than a year earlier, writes The Moscow Times.
In January, GDP fell by 2.1%, by 1.5% in February, and by 1.8% in two months, according to the Ministry of Economic Development. The INP estimates the fall in GDP in February to be even greater, at 1.7%. As a result, GDP in the first two months was the same as it was two years ago in January 2024.
INP was preparing to worsen its annual forecast with the release of the data for the first two months, but it was so weak that it now expects GDP to shrink further: by 0.7% in the second quarter and 0.6% at the end of the year.
Rosstat's data for January-February show a build-up of negative trends in the economy, INP states. 15% decline in construction in annual terms, minimal growth in retail trade turnover (0.3% in February after 0.7% in January) and a decline in wholesale trade (by 11% in January and 4.4% in February), the minimum for February freight turnover of transport since the kovidnogo 2020, lists INP. Output in the manufacturing sector declined by 2.9% in annualized terms over the two months, with 20 out of 24 types of production showing declines. Judging by the Central Bank's enterprise monitoring, business activity in the Russian economy declined in February - for the first time since September 2022.
INP forecasts a decline in industrial production in the first quarter by 0.8% compared to last year, in the second quarter by 0.3%, and by the end of the year output, according to its estimates, will add only 0.3%.
Entrepreneurial confidence in "retail" is at its lowest level in at least the last 10 years, stated the Center for Conjunctural Research of the Higher School of Economics. The slowdown in retail trade indicates a decline in economic activity, the INP said. Sales remained at a lower level than in January, reflecting the cooling of the economy, Raiffeisenbank analysts noted.
The significant slowdown in the public sector in February (6.8% in annual terms after 15.1% in January) may indicate the persistence of the savings model of consumer behavior, believes INP. Recently, there has been a tendency of a certain part of Russians, mostly with high and middle incomes, to shift from the consumer model of behavior to a savings model, postponing the purchase of expensive durable goods, the Center for Conjunctural Studies of the Higher School of Economics drew attention to. The consumer confidence of people is slowly but surely declining, its analysis of Rosstat data has shown.
Additional income from exports starting from April and a possible revival of investment activity with the reduction of the key rate may contribute to the improvement of the GDP forecast by the end of the year, says INP. Its forecast does not yet take into account the consequences of events in the Middle East. However, they will do little to help the Russian economy, the analytical center CMACP, which is close to the authorities, noted. It revised its forecast for this year and the next two years on the assumption that the active phase of the conflict will last until October, and the average export price of Russian Urals oil this year will be $81.6 per barrel. The effect was modest: the Central Bank raised its GDP growth forecast this year from 0.5-0.8% to 0.9-1.3%.
The next meeting of the Central Bank's Board of Directors on the key rate will be held on April 24, at which the regulator will update the forecast. February forecast of the Central Bank provided for GDP growth in the first quarter by 1.6% in annual terms, in the fourth quarter by 1-2%, and at the end of the year by 0.5-1.5%.