Shift at a standstill: Russia warned of the risk of economic stagnation in 2026
Next year, economic growth may stop, and in the worst case, it may decline. This is possible while maintaining high key prices, low world prices for raw materials and an over-strengthened ruble, Dmitry Belousov, an expert at the Center for Macroeconomic Analysis and Short-term Forecasting (CMAKP), predicts in the latest inflation monitoring (Izvestia has reviewed the document). A reduction in budget injections can also exert additional pressure. In such circumstances, businesses will face declining demand, declining investment opportunities, and a deterioration in the quality of banking assets. At the same time, experts say that the Russian economy is entering a period of more restrained dynamics not because of weakness, but it is being consciously transferred to a more stable regime. The Ministry of Energy expects GDP growth of 1.3%. Whether lowering the key rate will improve the situation and whether slowing inflation is worth such sacrifices is in the Izvestia article.
What explains the restrained dynamics of the economy
In Russia, the rate of price growth is slowing down — over the past three weeks, inflation has increased by only 0.3%. By the end of the year, the indicator by December 2024 may be in the range of 5.6-5.7% (for comparison, a year ago it was close to 10%), Dmitry Belousov, Deputy General Director, head of the department of analysis and forecasting of macroeconomic processes at CMAKP, estimated in the December monitoring of inflation.
At the same time, the current slowdown cannot be called macroeconomically healthy, the expert stressed. The main reason is that prices for non—food products, excluding gasoline and cigarettes, have stopped rising. This segment reacts most strongly to the decline in consumer demand. Additionally, the unexpectedly strong revaluation (strengthening) of the ruble had an impact. As a result, the price increase in this group is estimated at only 1.5% by the end of the year.
In many ways, the slowdown in inflation was facilitated by the high key rate, which remained at 21% for more than six months, and now stands at 16.5%. However, in 2026, with high interest rates, low global commodity prices and an over-strengthened ruble, the price of curbing inflation may be economic stagnation (at best) or recession (at worst), Dmitry Belousov notes.
In addition, there is a high probability that there will be a negative fiscal stimulus, that is, a sharp reduction or even a complete cessation of financing for certain industries, according to the CMACP material. Izvestia sent a request to the Central Bank, the Ministry of Energy and the Ministry of Finance.
At the same time, the Ministry of Economy lowered its GDP growth forecast in September: from 2.5% to 1% this year and from 2.4% to 1.3% in 2026.
— The economy is entering a period of more restrained dynamics not because of weakness, but because after several years of adaptation and increased workload, the system is consciously shifting to a more stable mode. This is a normal process for any large economy, especially in the face of external constraints and structural changes," said Andrei Glushkin, a member of the Council of the MRO Delovaya Rossiya.
Next year, GDP growth may reach only 1-1.3%, depending on how significantly the key one decreases, predicts Natalia Milchakova, a leading analyst at Freedom Finance Global. If the rate drops to 11-12% by the end of the year, the economy could add about 1.3%. If the key rate drops to only 13%, the growth is likely to not exceed 1%.
In some quarters of 2026, a decline in GDP is indeed possible, says Olga Belenkaya, head of the Macroeconomic Analysis Department at Finam. According to her, this will happen if, under the influence of new external or internal pro-inflationary factors, the tight policy of the Central Bank drags on. The regulator's basic forecast is an average rate of 13-15% in 2026— but it still suggests a reduction next year, the only question is the pace, the expert noted.
What is the threat of economic stagnation
— A high key interest rate, a strong ruble and a cautious fiscal policy do slow down the growth rate, but at the same time they solve a more important task — they consolidate price stability. Slowing down inflation in this case is not a side effect, but a conscious goal. For businesses, this means clear rules of the game, the ability to calculate projects and not budget for constant price hikes. For citizens, there are more predictable expenses and incomes without a sharp depreciation. Against this background, moderate GDP growth is becoming not a problem, but a reasonable compromise," said Andrey Glushkin from Delovaya Rossiya.
If the stagnation or decline in GDP drags on, it inevitably affects the incomes of citizens, company profits and budget revenues. The indicators of borrowers' debt burden are deteriorating, the risks of defaults are growing, and the quality of bank assets is decreasing. In such conditions, businesses reduce investments, which slows down the future production of goods and services, warned Olga Belenkaya from Finam.
The stagnation of the economy also leads to a decrease in the competitiveness of domestic products on world markets. Dependence on imports is increasing, and with it the country's economic and geopolitical authority is being lost, added Natalia Milchakova from Freedom Finance Global.
— Last year, with growth of 4.1%, Russia became the fourth economy in the world in terms of purchasing power parity (PPP). By the end of 2025, it will be able to hold this place only in case of stagnation or recession in a number of G7 countries, primarily Germany, Great Britain and France. If this does not happen, the Russian Federation will drop to fifth place," the expert noted.
At the same time, next year's budget, according to the expectations of the Ministry of Finance, will not be inflationary, that is, government spending will not grow much faster than income, the expert continued. According to her, if the Ukrainian crisis is resolved, it is possible to reduce the financing of certain sectors of the manufacturing industry.
However, this "negative fiscal impulse" can be offset by lower taxes and improved business access to resources. In this case, the investment potential will not decrease, and the growth rate of investments in development in 2026 may exceed the current 4% by at least 1 percentage point, which will support the economic recovery, Natalia Milchakova noted.
In general, there are currently no significant reserves to accelerate GDP growth in 2026. The sources of the increase are likely to begin to form later, as corporate lending recovers, primarily from the end of 2026, predicts Alexander Abramov, head of the Laboratory for the Analysis of Institutions and Financial Markets at the Presidential Academy. An additional factor may be the reduction of geopolitical risks, which stimulates more active investments on the part of businesses.
Переведено сервисом «Яндекс Переводчик»
