Russia's economy is in decline: recession is looming sooner than expected!

Russia's economy is in decline: recession is looming sooner than expected!

Russia's economy is facing considerable difficulties and is at risk of slipping into recession more quickly than previously thought. According to current forecasts from the Russian Central Bank under Elvira Nabiullina, growth is expected to slow in the next three quarters. In the July-September 2025 period, GDP growth was just 0.6 percent, down from 1.1 percent in the second quarter and 1.4 percent in the first quarter. For the fourth quarter of 2025, GDP is forecast to be between minus 0.5 and plus 0.5 percent, which would represent the first decline since the first quarter of 2023, as fr.de reported.

This cooling is caused by several factors. Although the overheating of the economy is easing, inflation remains above four percent and the labor market is showing signs of tightening. The central bank says it wants to keep key interest rates at 17.5 percent. Many companies in Russia have switched to “survival mode” as they struggle with challenges such as late payments, shrinking demand and liquidity constraints. Almost 39 percent of companies reported arrears, while 34 percent reported a decline in demand. There are also liquidity problems, which affect 32 percent of companies.

Economic conditions are becoming more difficult

Meanwhile, Ukraine is reporting a drone campaign against Russian infrastructure, which is having an additional negative impact on the economy. The country is also struggling with a fuel crisis, leading to rationing and closed gas stations in several regions. In this context, consideration is being given to supporting important major banks through rescue operations. Experts warn that the current shift to a war economy and high military production cannot provide a sustainable basis for future growth.

The situation is already being considered by various economic analyses. In April 2024, the International Monetary Fund (IMF) forecast economic growth of 3.2 percent for Russia. However, by May 2024, Gazprom reported historic losses, indicating unreliable trading data. The Russian government itself even expects economic growth of 3.9 percent for 2024, which is above the IMF forecasts, while Western economists see the Russian economy in an “early stage” of decline. Growth is apparently being boosted by high arms investments and extraordinary wage increases of 9.4 percent in the first half of 2024, but this does not appear to be sustainable in the long term merkur.de.

Western sanctions had a massive impact on the Russian economy in 2023, with a deficit of 3.4 trillion rubles, equivalent to about $42 billion. Gazprom also reported losses of $7 billion in 2024 for the first time since 1999 due to reduced gas sales to Europe. Future challenges are foreseeable, as Ukraine plans to stop transporting gas to Europe from January 1, 2025, which will place an additional burden on Russia.

Finally, it should be noted that the Russian government has announced that it wants to protect companies from Western sanctions. However, there are reasonable doubts that it reveals the true impact of the sanctions, as access to economic statistics has become increasingly restricted.