Russia slashes 2026 GDP growth outlook to 0.4% amid sanctions and war costs

Vice‑premier Alexander Novak told the Russian Development Ministry that the country’s 2026 GDP growth forecast has been cut from the September estimate of 1.3 % to just 0.4 %. He said the slowdown is “cyclical” but reflects the strain of sanctions, high military spending and a prudent oil‑price baseline of $59 per barrel that the budget will use through 2026. Novak added that a modest recovery is expected, with growth rising to 1.4 % in 2027 and reaching 2.4 % by 2029 as monetary policy eases.

Revised inflation expectations are now 5.2 % for 2026, with the central bank projecting 4.5‑5.5 % and keeping the 2027 rate at 4 %. The government faces a $60 billion budget deficit, inflation hovering near 6 % and a key interest rate of 14.5 %. Military expenditures have surged to about 7.5 % of GDP, up from 3.6 % in 2021, putting additional pressure on the economy. Novak warned that while higher oil and gas export prices boost trade surpluses and support the ruble in the short term, they cannot be relied upon for long‑term growth.