Russian President Vladimir Putin has demanded an explanation from the government and the Central Bank after the country's economy underperformed expectations in the first quarter of 2026. As the Kremlin investigates the reasons for the economic slowdown, significant declines have been recorded, particularly in the industrial and construction sectors. According to data from the Russian Ministry of Economic Development, Gross Domestic Product (GDP) decreased by 1.8% in the first two months of the year compared to the same period last year. The Central Bank had forecast 1.6% growth for this period.
The construction sector contracted by 16% and 14% in January and February respectively, according to official statistics. Oil and gas revenues fell by 45% compared to the same period last year. This led to the budget deficit reaching 4.58 trillion rubles. High interest rates and the economic impact of the ongoing war are putting pressure on growth. While the defense sector is expanding, civilian sectors continue to contract.
International organizations such as the World Bank and the International Monetary Fund (IMF) have lowered or slightly revised Russia's growth forecasts. The Kremlin-affiliated macroeconomic research center CMAKP states that although it expects an increase in oil prices, this will provide a limited contribution to growth. Experts emphasize that ending the war will not resolve the fundamental structural causes of the economic problems.
Putin stated that the economic stagnation cannot be explained solely by calendar effects and called for urgent measures to improve the business and investment environment. In an environment of declining investments, falling corporate profits, and weakening consumer demand, concerns are growing about the sustainability of economic growth.
