Russia Country Risk Rating

Russia’s overall risk rating remains medium-high. The war in Ukraine continues to be the primary determinant of Russia's political and economic trajectory. President Putin is trying to intimidate European countries to give less support to Ukraine, as the Ukraine conflict remains in deadlock and Ukraine is having more success in hitting targets in Russia. This could mean an escalation of tension with some European countries; more stray missiles into eastern European countries and threats to use tactical nuclear weapons. However, Putin also knows that Trump could be replaced by a less friendly U.S. president in early 2029 and will likely try over the autumn and winter to engineer new peace talks over Ukraine on Russian terms. Russian banks are also seeing noticeable depositor withdrawals over fears that deposits will be nationalised for Ukraine war funding, while Russian casualties mean that Putin is under pressure to consider a 2nd general mobilisation that would be deeply unpopular in Russia. All of this means the political violence rating remains at a very high rating. Political Interference remains high and the legal & regulatory risk stands at very high, as the Kremlin allegedly enforces strict control over domestic media and suppresses political opposition. Meanwhile, the risk of doing business remains at a medium level hampered by a labour shortage and a weak investment climate. The Russian economic landscape is mixed. Inflationary pressures are subsiding, while economic momentum has slowed with GDP growth turning negative in Q1. The IMF is projecting 1.1% GDP growth in 2026, as the private sector is squeezed by the war and this is also causing some disinflation with inflation projected to slow to 5.6% in 2026 by the IMF. The inability of the government to provide a stimulus generates a medium level risk, reflecting a large budget deficit but still a modest government debt/GDP. The IMF project a general government debt/GDP at 19.1% of GDP. Banking sector vulnerability is medium-low as banks remain profitable and supported by the state, though they face rising non-performing loans and high borrowing costs for the private sector.