Kathrine Frich
Economic analysts have long warned that years of wartime spending are putting Russia’s economy under pressure.
Officials have largely projected stability, despite mounting strain on key industries.
But new comments from the Kremlin suggest the situation may be worsening.
Signs of decline
Russian President Vladimir Putin acknowledged that key economic indicators have turned negative at the start of 2026.
Speaking at a government meeting, he said the country’s gross domestic product fell by 2.1% in January compared to a year earlier, according to Digi24.
Industrial output also declined, dropping by 0.8%, according to official data cited by Putin.
Slowing growth
The January contraction marks Russia’s first GDP decline since 2023.
Official figures show that growth had already slowed significantly last year, falling to around 1%, far below earlier expectations.
Out of 28 major industrial sectors, 21 reportedly ended the year in decline, including mining, metallurgy and manufacturing.
Budget pressure
Russia’s federal budget is also under strain.
In the first two months of the year, the deficit reached 3.5 trillion rubles as revenues dropped.
Putin said authorities must make “balanced decisions” to ensure long-term financial stability while avoiding inflation and labor market disruption.
Forecasts cut
Economic projections for 2026 have been repeatedly revised downward.
Initial forecasts of more than 2% growth were reduced to 1.3%, and could fall further.
According to Bloomberg, officials are considering lowering expectations to just 0.7% while preparing spending cuts.
Mounting risks
Experts warn the slowdown could significantly impact state revenues beyond oil and gas.
Economist Ilya Sokolov said tax income may fall short of expectations, while spending could exceed planned levels.
This could push the budget deficit to nearly 8 trillion rubles, raising concerns about the sustainability of Russia’s wartime economic model.
Sources: Digi24, Bloomberg
