Slowest Rate of Growth for Russia Since Q1 2023: 0.6% y/y in Q3 2025
Bottom Line: According to Ministry of Economic Development’s preliminary figures, Russia's GDP expanded by a moderate 0.6% y/y in Q3, marking the slowest rate of growth since Q1 2023 showing the economic slowdown in Russia is more evident now. We think Central Bank of Russia’s (CBR) previous aggressive monetary tightening coupled with sanctions, supply side constraints, low crude oil prices, softening natural gas exports due to European sanctions, relative RUB resilience and stubborn price pressures remained restrictive in Q3.
Figure 1: GDP Growth (%, Annual), Q3 2022– Q3 2025
Source: Ministry of Economic Development
After expanding by 1.1% in Q2 2025, Russian economy grew by a moderate 0.6% YoY in Q3, signaling the economic slowdown is more evident despite strong military spending, higher wages and fiscal stimulus as the war in Ukraine continues. The growth was fueled by manufacturing while industrial production volumes increased by a moderate 0.5% in Q3.
We think CBR’s previous monetary tightening, sanctions, supply side constraints, low crude oil prices, softening natural gas exports due to European sanctions, relative RUB resilience particularly after July and stubborn price pressures remained restrictive over growth figures in Q3.
Speaking about the GDP trajectory, economy minister Reshetnikov previously highlighted that "It is clear that the situation is challenging now. Certainly, the cool down period in the economy will continue for some time but it will end sooner or later."
It is worth noting that another constraint in the near future will be the new set of U.S. sanctions on Lukoil and Rosneft, which will come into force on November 21. (Note: According to the Guardian, sanctions have already disrupted Lukoil’s operations in Iraq, at pump stations in Finland and a refinery in Bulgaria). It is likely that Russian oil exports will be negatively impacted by the mentioned sanctions in 2026 while the size of the impact is yet to be known.
Due to slowdown in growth, Sberbank recently decreased its GDP growth prediction for 2025 from 1.5-2% to 0.5-1%. Ministry of Economic Development also revised down its forecast of GDP growth from 2.5% to 1% for 2025 and from 2.4% to 1.3% for 2026 following subdued growth data. Taking into account that CBR continues its easing cycle, the current discussion is now centered around whether the recent sharp fall in GDP growth demonstrates that Russia economy is entering a recession or merely cooling.
We think GDP growth will remain restricted due to factors like global trade policy uncertainty, lingering inflation, sanctions, supply side constraints, and relative RUB resilience. Capacity utilization in Russia reached its maximum in years, and labor force deficit is unlikely to change in the short term until the war in Ukraine is over will ignite more frictions.
Despite problems, the easing cycle by CBR could slowly reignite growth but this will take time. We think Russian GDP growth trajectory will depend on how Ukraine war will go in 2026.