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Russia  ·  Chronicles · Klaus Dormann

Russia's 1% growth rate is not expected to rise to 1.5% until 2027

May 4, 2026  ·  14 min read  ·  By Klaus Dormann  ·  Original (German)
Russia's 1% growth rate is not expected to rise to 1.5% until 2027

Author: Klaus Dormann

According to the Russian Ministry of Economic Development, Russia’s gross domestic product in the first quarter of 2026 was 0.3 percent lower than a year ago. In light of the weak production trend at the start of the year, the “Vienna Institute for International Economic Studies” (wiiw) has now lowered its forecast for this year’s growth in the Russian economy from 1.2 percent to just 0.9 percent. This would make it slightly lower than in 2025. Last year, growth slowed from 4.9 to 1.0 percent. However, the wiiw still expects growth to accelerate to 1.5 percent in 2027. 

Is Russia now even sliding into a “recession”?

In addition to the wiiw, other institutes and banks have lowered their forecasts for this year’s growth in the Russian economy. The Moscow-based “Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF)” nearly halved its monthly updated growth forecast for 2026 at the end of April. It now expects GDP growth of only 0.5 to 0.7 percent this year. In March, it had still forecast economic growth of 0.9 to 1.3 percent for 2026 (The Moscow Times). Sberbank now expects real GDP growth of only 0.5 to 1 percent for 2026. The previous forecast range from Russia’s largest bank had been 1.0 to 1.5 percent (russland.capital).

According to globalmsk.ru, some analysts believe the Russian economy is already in a “recession” given the 0.3 percent decline in production in the first quarter of 2026 compared to the first quarter of 2025. However, Nikita Maslennikov, a leading expert at the “Center for Political Technologies,” disagrees with this assessment in an interview with globalmsk.ru. In his opinion, Russia is unlikely to see a further decline in real gross domestic product in the second quarter, as “external factors” will play a greater role in the second quarter than they have so far. The rise in energy prices due to the conflict in the Middle East has led to additional oil and gas revenues. These are expected to flow into the federal budget starting in mid-April.

Regarding current economic developments, Maslennikov emphasizes that the 2.3 percent overall increase in industrial production in the first quarter of 2026 is attributable exclusively to the rise in production in the “defense industry.” Production in the civilian sectors of industry was 0.6 percent lower than in the previous year.

Regarding the recovery of consumer demand in the domestic market, he notes that price trends stabilized somewhat in March following the rise in January and February. This slightly increased consumer demand.

wiiw: “Stagnation in Russia Despite Financial Windfall from Iran War”

This is the headline used by the “Vienna Institute for International Economic Studies” (wiiw) for the Russia chapter in the press release accompanying its “Spring Forecast” for 23 countries in Central, Eastern, and Southeastern Europe, published at the end of April. However, the institute does not expect “stagnation” with zero growth in aggregate economic output in Russia in 2026. It is merely lowering its GDP forecast for the current year by 0.3 percentage points to 0.9 percent.

For Russia’s budget, the windfall comes “at exactly the right time”

In its press release, the Vienna-based institute assumes that the Russian state budget, in particular, will benefit from the rise in energy prices:

“The closure of the Strait of Hormuz has brought Moscow unexpected additional revenue from higher oil and gas prices. From Russia’s perspective, this comes at exactly the right time, as it alleviates the strained budget situation. Last year, the budget deficit stood at 3.9 percent of GDP—a fairly high figure by Russian standards. Until the start of the war against Iran, it had looked as though the Russian budget deficit might spiral out of control this year, which is why the government had considered cuts of 10 percent, with the exception of military and social spending.”

“The war with Iran is stabilizing the Russian budget. The longer it lasts and the longer oil prices remain high or rise even further, the more positive the effects will be for Russia; after all, for every dollar the price of crude oil rises, 58 cents flows into the Russian state budget,” says Vasily Astrov, a Russia expert at wiiw.

Russia’s GDP growth benefits “only marginally” from higher energy prices

According to the press release, however, the development of production in the Russian economy is likely to benefit “only marginally” from higher energy prices. The higher revenues would not be channeled into additional spending, but are instead earmarked for reducing government borrowing and paying down the liabilities of energy companies.

Vasily Astrov cites “still-high key interest rates,” insufficient investment in new production capacity, and labor shortages as the main causes of the Russian economy’s weak growth. The high energy prices resulting from the war in Iran would do little to change this. Astrov highlights the political implications of higher energy prices:

“Undoubtedly, the war in Iran is helping President Putin to continue his war of aggression against Ukraine, as it provides him with additional revenue and greater political leeway.”

Russia will drop to near the bottom of the wiiw’s growth rankings by 2027

The forecast by the Vienna Institute for International Economic Studies covers a total of 23 countries in Central, Eastern, and Southeastern Europe, including Turkey (see table at the end of the wiiw press release).

In the following figure, these countries are marked in dark gray. The figure shows that, according to the wiiw, economic growth in these countries will decline on average from 2.3 percent in 2025 to 2.1 percent in 2026.

Kronenzeitung: Eastern Europe continues to grow faster than the Eurozone, April 29, 2026

The following two “rankings” for growth rates in 2026 and 2027 cover 12 of the 23 countries in total. The wiiw expects the strongest growth among the selected 12 countries in 2026 and 2027 to be in Turkey (2026: 3.7 percent; 2027: 4.1 percent). Poland will lead the way in growth among the selected Eastern EU member states (blue bars) in 2026 with 3.6 percent. In 2027, Croatia (2.7 percent) is expected to grow slightly faster than Poland (2.6 percent).

Kronenzeitung: Eastern Europe continues to grow faster than the Eurozone, April 29, 2026

Hungary’s economy will grow by 1.6 percent in 2026 and by 1.8 percent next year.

At the bottom of the above ranking for 2026 are the EU member states Romania and Slovakia. Their growth in 2026, at 0.5 percent each, is expected to be even lower than Russia’s growth (0.9 percent).

In 2027, Russia will then slip to the bottom of the ranking of the selected 12 countries—although the wiiw expects Russia’s growth to accelerate to 1.5 percent in 2027. The complete table of forecasts for all 23 countries in the wiiw press release shows that the institute expects only Belarus to have slightly weaker economic growth in 2027 (1.4 percent) than Russia (1.5 percent).

wiiw “Country Overview”: Russia’s growth rises to 1.8 percent by 2028

In its “Country Overview” for Russia, the wiiw notes the following for 2026:

The additional revenue generated by high energy prices resulting from the war in the Middle East has provided much-needed relief for the strained national budget.

They are also likely to have a slightly positive impact on economic growth, which slipped into negative territory at the beginning of 2026.

In the baseline scenario, real GDP growth of 0.9 percent is forecast for this year, followed by an acceleration in 2027 and 2028 due to the expected easing of monetary policy.

Should global energy prices remain high or continue to rise in the longer term, GDP growth will be higher, though inflation will also accelerate.”

Compared to its “Winter Forecast” from January, the wiiw has now lowered its forecast for this year’s real gross domestic product growth from 1.2 to 0.9 percent. It maintained its growth forecast for 2027: It continues to expect growth to accelerate to 1.5 percent next year. The wiiw raised its growth forecast for 2028 from 1.5 to 1.8 percent.

wiiw Country Overview: Russia

wiiw: Country Overview Russia, April 29, 2026

Current account surpluses will be much higher than previously expected

The wiiw has significantly raised its forecasts for Russia’s current account surpluses in light of the current sharp increases in energy and commodity prices. In 2026, the current account surplus will reach 5.6 percent of gross domestic product (previous forecast: 1.1 percent of GDP). According to the new forecasts, current account surpluses in 2027 (2.5 percent of GDP) and 2028 (2.8 percent of GDP) will be roughly twice as high as the wiiw had previously expected.

Economic Performance in the First Quarter of 2026: Russia’s GDP Fell by 0.3 Percent

In March 2026, Russia’s gross domestic product rose by 1.8 percent year-over-year, according to the Russian Ministry of Economic Development. However, the increase in March did not fully offset the annual GDP declines in January (-1.8 percent) and February (-1.1 percent). In the first quarter, GDP was 0.3 percent lower than a year ago.

Monthly trend in real gross domestic product
Year-over-year changes in percent

Alfa Bank.ru; Arseniy Anatolyev: The recovery of economic activity exceeded expectations. 04/30/26

According to preliminary calculations by the Ministry of Economic Development, seasonally adjusted real gross domestic product rose by 1.4 percent in March compared to February, following a 0.3 percent increase in February compared to January.

Industrial production in the first quarter was barely higher than in the previous year

In March 2026, Russia’s industrial production was 2.3 percent higher than a year ago. However, in the first quarter of 2026, it rose by only 0.3 percent year-over-year. In January and February 2026, industrial production actually declined compared to the same months of the previous year.

According to the “Russia Chartbook” published by the Kyiv School of Economics, corporate capacity utilization fell from its historic high reached at the end of 2024 to 77.5 percent by the first quarter of 2026. According to the institute, the causes of the decline include labor shortages and high borrowing costs. 

Kyiv School of Economics Institute: Russia Chartbook, April 30, 2026

According to Rosstat estimates, seasonally and calendar-adjusted industrial production rose again by 0.3 percent in March compared to the previous month.

Mining continued to record moderate growth in March 2026 compared to the same month of the previous year (+1.0 percent). The increase in mining production in the first quarter of 2026 was +0.8 percent. Mining was thus a “driver” of the overall weak growth in industrial production of 0.3 percent. 

In the “manufacturing sector,” production rose by 3.0 percent year-over-year in March. Production in the “defense-related” industrial sectors continued to grow strongly (“manufacture of other transport equipment,” “pharmaceutical production,” “manufacture of computers, electronic, and optical products”). However, production declined in many “civilian” sectors. In the first quarter of 2026, production in the “manufacturing sector” was still 0.7 percent lower overall than a year ago.

Production in wholesale trade, transportation, and construction declined in the first quarter

Compared to the first quarter of 2025, production also declined in the first quarter of 2026 in wholesale trade (-0.5 percent), transportation (-3.4 percent), and construction (-10.0 percent). Agricultural production in the first quarter of 2026 was only slightly higher than a year ago (+0.2 percent).

Economic Indicators for March 2026 and the First Quarter of 2026
: Year-over-Year Changes in %

Finam.ru; Olga Belenkaya: Slightly negative trend with a recovery in March, Economic conditions in March and the first quarter, April 30, 2026

The consumer sector provided strong growth momentum—amid significantly higher wages

Real retail sales rose by 6.2 percent in March compared to the previous year. According to the Ministry of Economy, the main reason for the increase was growth in sales of passenger cars (+42.1 percent), pharmaceuticals (+14.0 percent), and clothing (+8.8 percent).

In the first quarter of 2026, retail sales rose by a total of 3.6 percent in real terms compared to the previous year. Sales of non-food items grew significantly faster (+5.2 percent) than sales of food items (+1.9 percent).

Real sales in the services sector rose by 3.3 percent in the first quarter, a similar rate of growth to that of retail sales.

Olga Belenkaya notes regarding developments in the retail sector that Rosstat has significantly revised its data upward. She also points out that SberIndex data and current data from the Russian Central Bank on developments in the consumer sector were less positive than the Rosstat data.

Wages continued to rise strongly in January and February. In February, average wages were higher than a year earlier for the second month in a row, by about 15 percent in nominal terms and 8.6 percent in real terms.

Monthly trends in nominal and real
wages: Year-over-year changes in percent

Alfa Bank.ru; Arseniy Anatolyev: The recovery of economic activity exceeded expectations. 04/30/26

According to Belenkaya, however, wage trends varied significantly across industries. Many sectors recorded increases well below the national average.

Recommended reading:

“Die Presse” podcast on the Russian economy:

Spring forecasts from the Vienna Institute for International Economic Studies, wiiw:

Overall economic development:

Fiscal policy; national budget and oil prices:

Translated from the German original published on ostwirtschaft.de, May 4, 2026.

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