Russia economy shows growth amid rising deficit and energy revenue concerns

Russia's economy showed growth in the second quarter, with GDP increasing 1.3% compared to the same period last year. This growth, which also saw a 0.6% increase for the first half of the year, exceeded forecasts from the government and central bank, driven largely by military-industrial spending and rising oil and gas prices.

However, experts warn of underlying economic vulnerabilities. Charles Lichfield of the Atlantic Council’s GeoEconomics Center points to rising budget deficits and inflation as critical concerns. Despite higher fossil fuel prices, energy revenues have declined; oil and gas revenues in the first half of 2026 were reported at only 64% of levels from two years prior.

These challenges are compounded by Ukrainian drone strikes on Russian refineries and increased Western sanctions, including EU oil price caps. Additionally, consumer behavior is shifting, with Russia's largest retailer noting a significant trend of citizens moving toward cheaper food products and store-brand alternatives.