Russia sharply downgraded its economic growth forecast for 2026, signaling the government is bracing for a prolonged slowdown as weaker oil revenues, high inflation and heavy wartime spending strain the economy.<\/p>\n
Deputy Prime Minister Alexander Novak said<\/a> the government now expects gross domestic product to grow by just 0.4% next year, down from a previous forecast of 1.3%.<\/p>\n The revised outlook, announced Tuesday, points to mounting concerns inside the government over the durability of Russia\u2019s wartime economic model after more than four years of fighting in Ukraine.<\/p>\n The economy contracted by 0.3% in the first quarter, according to the Economic Development Ministry, even as President Vladimir Putin has urged<\/a> officials and the Central Bank to accelerate growth.<\/p>\n Economist Andrei Gnidchenko of the CMAKP analytical center described<\/a> the new forecast as a surprise after reviewing<\/a> projections from major Russian and international institutions earlier this month.<\/p>\n Novak said the forecast was based on \u201cconservative\u201d assumptions, including an average Russian oil price of $59 per barrel this year and $50 per barrel over the following three years.<\/p>\n Those assumptions are even lower than the Central Bank\u2019s estimates. In April, the Central Bank raised<\/a> its own forecast to $65 per barrel for this year and $55 for 2027-2028.<\/p>\n Novak said the lower oil-price assumptions would help contain budget spending at a time when state revenues \u2014 hit by a strong ruble and weaker oil prices \u2014 are falling while expenditure demands, including military spending, continue to rise.<\/p>\n Under the government\u2019s framework, lower baseline oil-and-gas revenues would limit planned spending, while any additional energy income would be directed into the National Wealth Fund.<\/p>\n Economist Yegor Susin said<\/a> the figures appeared to be \u201cnot exactly a forecast, but rather assumptions for drafting the budget.\u201d<\/p>\n \u201cThe oil-and-gas component of the budget implies a significant reduction in spending, although in the autumn, of course, everything will be revised again depending on how conditions change,\u201d Susin wrote.<\/p>\n Dmitry Polevoy, another economist, said<\/a> the \u201capparently higher level of budget spending\u201d remained the main source of uncertainty and risk for the outlook.<\/p>\n The government forecast also points to a difficult year ahead for households and businesses.<\/p>\n Investment is expected to continue falling this year, while inflation is projected to remain elevated at 5.2%. Growth in Russians\u2019 real incomes is forecast to slow to 1.6% from 7.7% last year, while consumer spending growth is expected to ease to 1.2% from 4% in 2025.<\/p>\n Unemployment is projected to edge up slightly to 2.3%-2.4%, from 2.2% last year and in the first quarter of 2026.<\/p>\n The government expects conditions to improve from 2027 onward as the Central Bank cuts interest rates and earlier monetary easing begins feeding through into the economy.<\/p>\n GDP growth is forecast to recover to 1.4% in 2027 before accelerating to 2.4% by 2029. Investment, household incomes and consumer spending are also expected to strengthen from 2027, according to the forecast.<\/p>\n Even if those projections are met, however, the expected growth rates would remain well below the 3.5% annual expansion that several prominent Russian economists have described<\/a> as the minimum needed for sustainable development.<\/p>\n