Russian Economy Grew by 1% in 2025
Bottom Line: According to official announcement, Russian economy grew by 1.0% in 2025. President Putin said this slowdown was expected and intentional as part of measures aimed at curbing inflation. We think Central Bank of Russia’s (CBR) previous aggressive monetary tightening coupled with sanctions, supply side constraints, relative RUB resilience and stubborn price pressures remained restrictive in 2025. We envisage growth to hit 1.1% in 2026 as tightening cycle is still feeding through and easing effects will only come through fully into H2 2027/2028.
Figure 1: GDP Growth (%, Annual), Q1 2022– Q4 2025
Source: Ministry of Economic Development
According to official announcement, Russian economy grew by 1.0% in 2025, signaling the economic slowdown is more evident despite strong military spending, higher wages and fiscal stimulus as the war in Ukraine continues. The main drivers of Russia’s economy remained manufacturing, mechanical engineering, and pharmaceutical production.
Speaking about the GDP figures, president Putin highlighted that this slowdown was expected and intentional as part of measures aimed at curbing inflation. Putin added on February 3 that the growth rate should be restored, via improving the business climate, and increasing investment activity with a focus on stimulating labour productivity.
We think CBR’s previous monetary tightening, sanctions, supply side constraints, and adverse global developments will remain restrictive over growth figures in 2026. 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. The key for Russian economic growth in the next few years will be if a deal in Ukraine will be sealed, and when (and which) sanctions will be lifted. We envisage growth to hit 1.1% in 2026 as tightening cycle is still feeding through and easing effects will only come through fully into H2 2027/2028.