Russia: The growth spurt at the end of the year
Author: Klaus Dormann
In the course of 2025, seasonally adjusted production in the Russian economy largely stagnated from month to month until the fall. However, comparing the production results for 2025 as a whole with those of the previous year, Russia's real gross domestic product still rose by 1.0 percent, according to initial estimates by the statistics office Rosstat.
This was helped by the fact that overall economic production grew significantly in the last four months of 2025. According to initial estimates, real GDP reached a new high in December 2025. A chart from the Institute for Economic Forecasting of the Russian Academy of Sciences shows that, seasonally adjusted, it was likely around three percent higher in December than in August.
However, the institute warns against assuming that this growth spurt will continue in 2026. The vast majority of analysts also assume that the increase in overall economic output in 2026 is likely to be only around one percent again. The research institute of the state development company VEB also expects growth of only 0.8 percent. The Russian government, on the other hand, has based its budget planning for 2026 on a slightly higher growth rate of 1.3 percent.
IEF-RAS: Strong GDP growth since September
On February 13, the Institute for Economic Forecasting of the Russian Academy of Sciences (IEF-RAS) updated its monthly "Short-Term Analysis of Gross Domestic Product Development" based on Rosstat data for December.
Its initial estimate of seasonally adjusted production growth shows a further sharp rise in the real gross domestic product index in December (see black line in the figure below). The institute estimates seasonally adjusted GDP growth in December at 2.1 percent compared to November.
According to the institute, this sharp increase is likely to be due, among other things, to "special features of the statistical recording of production output (work volume) of companies operating under government contracts." This probably means that services provided by companies on public contracts are allocated by Rosstat to the month of December, even though they were actually provided earlier. Artem Chugunov also reports on several other attempts at explanation in Kommersant.
Estimate of the real gross domestic product index
Blue columns: Change in the real gross domestic product index compared to the same month of the previous year in %
Black line: Real gross domestic product index, January 2019 = 100
IEF-RAS: Short-term analysis of GDP dynamics, February 13, 2026; data as of February 10, 2026
Compared to December 2024, real gross domestic product rose by 1.8 percent according to IEF estimates (see blue column in the figure above). According to the institute's estimates, GDP for the entire fourth quarter of 2025 was 1.3 percent higher than a year ago.
Based on the statistical data available at the beginning of February, the institute estimates the GDP growth rate for the whole of 2025 at +1.1%, which is slightly higher than Rosstat's initial estimate (+1.0%).
The "short-term" IEF forecast of 2% for 2026 is likely to be lowered again
In the February edition of its monthly "short-term" forecast, the institute raised its forecast for Russian economic growth in 2026 significantly from 1.3 to 2.0 percent. However, it expressly notes:
"It should be particularly emphasized that the upward revision of the growth forecast for 2026 was influenced by the accelerated economic momentum in the fourth quarter and in December 2025. Extrapolating these trends suggests that economic growth could be around 2% at the end of 2026.
However, there is currently no reason to believe that the factors that accelerated economic activity at the end of 2025 will be sustainable. Therefore, once the statistical data for the first quarter of 2026 is available, it is very likely that the forecast for GDP growth in 2026 (+2%) will be revised downward."
In its latest "Quarterly GDP Forecast" published in mid-December, the institute expects annual growth in the Russian economy to accelerate to 1.4% in 2026 after declining to 0.7% in 2025.
IEF: These are the main risks to further growth
According to the IEF, further growth in overall economic output in the coming months could be jeopardized primarily by slower growth in consumer demand and a further decline in corporate investment.
The institute also notes that public spending from the federal budget fell in January compared to the previous year (-1.4%), while oil and gas revenues in the federal budget were 50.2% lower at the same time.
Development of production in key industries in December 2025
The IEF points out that production in key industries continued to develop very differently in December 2025.
Production growth accelerated significantly in the "manufacturing sector" (+7.8% compared to December 2024), construction (+4.8%), and wholesale trade (+1.5%).
At the same time, other key industries recorded a decline in production: mining (-2.8%), power generation (-1.1%), and goods transport (-1.3%).
Economic indicators for December 2025 and the year 2025
compared with the results for the previous year 2024
Changes compared with the previous year in %
Sources: Finmarket.ru, 06.02.26; Finam.ru; 09.02.26
Industrial production in 2025: slower growth in manufacturing, accelerated decline in mining
In the industrial sector, growth in the manufacturing industry slowed significantly in 2025 as a whole. However, after rising by 9.1 percent in 2024, it still achieved significant growth of 3.6 percent. The decline in mining production accelerated from -0.5 percent in 2024 to -1.6 percent in 2025. Overall, industrial production growth fell to 1.3 percent in 2025 (2024: +5.1%).
In the following figure from an analysis published on Friday by the research institute of the state development bank VEB.RF, the dark green line shows how the index of total industrial production developed after seasonal and calendar adjustments. It can be seen that the "manufacturing sector" rose at an above-average rate (light green line). In contrast, production in the mining sector declined (black line).
Industrial production (Jan. 2021=100);
seasonally and calendar adjusted
Dark green: Industry as a whole; black: Mining; light green: Manufacturing
VEB Institute: Russia's economy in December 2025 – January 2026, 20.02.26
Arms production caused industrial production to rise sharply
The IEF cites the following three sectors, which mainly contribute to the manufacture of defense products, as the main drivers of strong growth in the manufacturing sector in December 2025 (+7.8%): The production of other transport vehicles and equipment (+28.6% compared to Dec. 2024); the manufacture of metal products (+21.5%); the extraction of metal, known as "metallurgy" (+16.9%).
The production of pharmaceuticals rose by 12.9% compared to December 2024.
At the same time, 14 economic sectors, which accounted for almost half of total manufacturing output (48%), recorded a decline in production.
The growth engine of "private consumption" also lost momentum in 2025
In the retail, service, and hospitality sectors, real sales in 2025 also rose at a significantly slower pace than in 2024. Nevertheless, according to the IEF, consumer demand remained the most important "engine of the economy." Real retail sales rose by 3.9% in December 2025 compared with the same month of the previous year. Sales in the hospitality industry continued to grow even more strongly (+9.4%). In the area of paid services, sales were 3.1% higher in December (Finmarket).
Real wages and consumption (Jan. 2014 = 100);
seasonally and calendar adjusted
Gray line: real wages; black line: real retail sales;
green line: real sales of paid services
VEB Institute: Global Economy and Markets, February 13, 2026
Real disposable income grew by 7.4% in 2025
Consumption growth was supported by a significant increase in real wages (+4.8% from January to November 2025 compared to the previous year; Finam.ru). The rise in wages contributed significantly to the continued very strong increase in real disposable income, which Rosstat estimates at 7.4 percent in 2025 (Interfax).
Index of real disposable income,
seasonally and calendar adjusted (4th quarter 2013=100)
VEB Institute: Global Economy and Markets, February 13, 2026
Despite the sharp rise in incomes, growth in private consumption slowed significantly in 2025 compared to 2024. According to estimates by the Ministry of Economic Development, private consumption rose by only 2.9% in 2025. In 2024, however, it had grown by 7.1% (Kommersant).
The VEB Institute forecasts GDP growth of only 0.8% for 2026
The chief economist of the VEB Institute, former Deputy Minister of Economy Andrey Klepach, recently presented the VEB Institute's new economic forecasts at an economic conference in Sochi ("Mountain Grain Assembly 2026") (oilworld.ru reported). On Friday, the VEB Institute also published the forecasts in its report "Russia's Economy in December 2025 – January 2026." In summary, Klepach and the VEB Institute expect the following trends for the Russian economy:
GDP growth will be slightly weaker in 2026, but industry will grow more strongly than in 2025
Annual growth of the overall economy will slow from around 1 percent in 2025 to 0.8 percent in 2026. However, the sharp slowdown in industrial production growth in 2025 will accelerate from 1.3 percent to 2.4 percent.
The VAT increase, the ongoing restrictive monetary policy, and the expected decline in investment in the energy sector will have a negative impact on economic growth in early 2026. In the "medium term," in 2027 and 2028, GDP growth is expected to pick up to around 2.5 percent.
Preliminary economic data and forecasts from the VEB Institute
*) Forecasts by the VEB Institute
VEB Institute: Russia's economy in December 2025 – January 2026, 20.02.26
Incomes are rising much more slowly, consumer demand is slowing down
Real disposable income growth will slow sharply in 2026 due to the increase in VAT and lower corporate income. It will no longer reach 7.4 percent as in 2025, but only 1.0 percent. Real wage growth will slow from 4.4 percent to 3.7 percent in 2026.
Consumer demand is expected to decline at the beginning of 2026. In 2026, real retail sales growth will slow to 1.7 percent (2025: +2.6 percent). Real sales in the service sector will grow by only 1.8 percent in 2026 (2025: +2.7 percent).
Capital investment will decline by 0.9 percent in 2026 compared to 2025.
Growth in investment in tangible assets is expected to have fallen to just 0.4 percent in 2025. In 2026, capital investment is expected to decline by 0.9 percent due to restrictive monetary policy and higher tax burdens.
Inflation will be slightly higher at the end of 2026 than at the end of 2025
In December 2025, the annual increase in consumer prices fell to just 5.6%, as shown by the black line in the figure below. In January, the inflation rate rose to 6.0% with the increase in value-added tax. The colored bar sections show the contribution of food, non-food items, and services to the overall increase in consumer prices. The red line shows the rate of change in industrial producer prices.
Increase in consumer prices compared to the same month of the previous year in percent
VEB Institute: Russia's economy in December 2025 – January 2026, February 20, 2026
In December 2026, the annual increase in consumer prices will be slightly higher than at the end of 2025, at 6.2%, according to the VEB Institute. At the end of 2027, it is likely to still significantly exceed the Central Bank's inflation target of 4 percent, at 5.3%.
The key interest rate, which was lowered to 16% in December 2025, will fall to 12% at the end of 2026 and to 7% at the end of 2027.
The budget deficit and public debt are rising significantly
In 2026, total government revenues will rise slightly, although revenues from the oil and gas sector will continue to decline. With spending continuing to grow to between 45.9 and 47.8 trillion rubles in 2026, the budget deficit will rise to between 3.8 and 5.8 trillion rubles in 2026.
Significant borrowing will be required as early as the first quarter of 2026. Public debt will grow significantly from RUB 31.2 trillion (14.6% of GDP) in 2025 to RUB 39.5-41.0 trillion (17.6-18.1% of GDP) in 2026.
Declining energy exports may recover moderately in 2026
In 2025, exports in the fuel and energy sector declined due to sanctions and increased competition. With the reorientation toward Asian and African markets, moderate growth is expected for the second half of 2026. Increased natural gas deliveries to China via the Power of Siberia pipeline will support exports. There is a risk of stagnation in LNG exports due to sanctions.
The price of Russian Urals oil fell to an average of $55.6 in 2025 (December: $39). A further decline to $48–51 is expected for the 2026 annual average (with a Brent price of around $65).
Recommended reading:
- German-Russian Chamber of Foreign Trade:
Focus analyses, German; also Russian; (selection): Weak growth, declining available reserves and high military spending, February 18, 2026 - Podcast "Tsars, Data, Facts" by the German-Russian Chamber of Foreign Trade by Thomas Baier: From boom to stagnation: Russia's economy in 2026; Guest: Vasily Astrov, 36 min., February 17, 2026
- DW.com.ru; Stuart Brown: LNG imports: Is Europe becoming dependent on the US again? The US has replaced Russia as Europe's leading gas supplier; 21.02.26
- Joe Blogs video: Russia hits new lows. Russia's oil and gas revenues have plunged to their lowest level since 2020. But the bigger story may be price. 02/19/26
- VEB Institute: Russia's economy in December 2025 – January 2026, with forecasts for 2026. 20.02.26
- Politcom.ru; Marina Voitenko: The Central Bank warned of inflation risks, 02/19/26
- The Bell; Denis Kasyanchuk: GDP data – what it reveals, what it hides, 02/18/26; The Bell; Denis Kasyanchuk: The Bell's Monthly Briefing — January, 02/12/26
- Joe Blogs video: Russian Food Crisis. Food prices in Russia are back in focus — and this time it's cucumbers leading the headlines. Official data shows food inflation running at 5.88% in January, just below the overall inflation rate of 6%, 02/18/26
- Focus.de; Jennifer Braunstein: Impending economic crisis. War in Ukraine drives up prices: Life in Russia is becoming increasingly expensive; 19.02.26; BBCcom; Olga Shamina, Yaroslava Kiryukhina, Sergei Kagermazov: Food prices are surging in Russia. Is the war hitting Russians in the pocket? 18.02.2
- AOL; Reuters; Andrew Osborn: In Russia, the humble cucumber becomes latest symbol of rising wartime prices, 17.02.26
- Finmarket.ru: Inflation in Russia was 1.62% in January. The annual inflation rate accelerated from 5.59% in the previous month to 6.00%, 02/13/26
- Institute for Economic Forecasting of the Russian Academy of Sciences; IEF-RAS: Short-term analysis of GDP dynamics, 02/13/26
- Kommersant; Artem Chugunov: GDP growth will be tested for sustainability, 02/18/26; Private household demand remains high. Alfa Bank's estimate of consumption in January, 02/16/26; Companies have given different assessments of the business climate, 02/12/26; December protects the year. The last month of 2025 gave the economy a boost, 02/11/26
- Phoenix Roundtable: The Putin System – How Strong is Russia? Anke Plättner discusses with: Katja Gloger; publicist; Michael Thumann, Moscow correspondent, Die Zeit; Roman Goncharenko, Deutsche Welle; Prof. Alexander Libman, Eastern Europe Institute, Free University of Berlin, 02/18/26
- Focus online; Anna Schmid: An old joke is circulating in Russia because of Putin's economic slump. Oil revenues are falling, the national deficit is growing. Political scientist Alexander Libman explains in a recent interview what an old joke has to do with the situation, 02/18/26
- Ukrinform; english.nv.ua; Alona Sonko: Russia's economy is fragile but not facing imminent collapse – expert, summary of the following ukrinform interview with Mykhailo Honchar, 02/18/26; ukrinform.ua; Myroslav Liskovich, Kyiv: Mykhailo Honchar, President of the Center for Global Studies "Strategy XXI": Russia acts according to the logic of a crocodile, which is destroyed not so much by force as by cunning, 02/17/26
- Nezavisimaya Gazeta; Anastasia Bashkatova: The transition to a high-wage economy is delayed, 02/17/26
- Finam.ru; Olga Belenkaya: Inflation in Russia was below expectations in January, 02/16/26
- Alfa Bank: The central bank surprised with a cautious signal. What will the next decision look like? The chances of a continuation of key interest rate cuts; 02/16/26
- Gaidar Institute commentary: Yevgeny Goryunov: "The Central Bank's decision to cut the key interest rate was unexpected, but justified by the dynamics of core inflation." 02/15/26
- Joe Blogs video: Russia's central bank has just made a shock move — cutting interest rates to 15.5% at a time when inflation is rising again. • Inflation is moving back up • VAT has just been increased from 20% to 22% • Inflation expectations have climbed to 13.7% • The ruble has been strengthening • Corporate profits are under pressure • GDP growth is slowing So why cut rates now? 02/15/26
- Finmarket.ru: Inflation in Russia was 1.62% in January. The annual inflation rate accelerated from 5.59% in the previous month to 6.00%, 13.02.26
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