Russia downgrades 2026 economic growth forecast to 0.4% from 1.3%, deputy PM says

By Darya Korsunskaya

MOSCOW, May 12 – Russia has cut its economic growth forecast for 2026 and the following three years but left unchanged the projected oil price despite the spike in global prices driven by the war in the Middle East, Deputy Prime Minister Alexander Novak told Vedomosti daily in an interview on Tuesday.

New Economy Ministry forecasts have lowered gross domestic product (GDP) growth to 0.4% in 2026 from 1.3% previously and to 1.4% in 2027 from 2.8%, and growth is expected to reach 2.4% in 2029, Novak said. He argued that a slowdown was expected after a period of robust growth in 2023-24, which, as many analysts are saying, was fuelled by military spending to meet the needs of the war in Ukraine.  

“Economic dynamics are cyclical. After a period of high growth, there is always a correction, often accompanied by structural transformation. This is a normal stage for the economy,” Novak said, stressing that the economy is developing in an environment of “unprecedented pressure from sanctions.” 

Russia’s $3 trillion economy, hit by the war in Ukraine, Western sanctions, and high interest rates, contracted by 0.3% in the first quarter, marking its first quarterly decline since early 2023, after tax hikes at the start of the year and deep discounts on Russian oil linked to Western sanctions. 

In a surprise move, Novak said the ministry projected that the oil price used for calculating budget revenue would remain at $59 per barrel in 2026. The projected oil price equals the so-called “cut-off” price, which determines what share of the budget’s oil revenue goes to the fiscal reserve National Wealth Fund.

The oil price is expected to stay at $50 per barrel for the next three years although many analysts had said that Russia could be among the main beneficiaries of a rise in oil prices after U.S. and Israeli attacks on Iran and a blockade of the Strait of Hormuz. 

“It is important to continue pursuing a pragmatic and conservative policy. The crisis creates conditions for increased export revenues from oil and gas, as well as several other goods. However, this effect is not long-term,” Novak told Vedomosti. 

Last year, President Vladimir Putin asked the government to ensure that growth resumes in 2026. Last month, he rebuked senior officials over slowing growth and told them to devise new ways to support the economy.

“The government is systematically working to bring economic growth back to a sustainable long-term trajectory, aiming to meet or exceed the global average rate, while also achieving national development goals,” Novak said. 

(Reporting by Darya Korsunskaya; Writing by Gleb Bryanski; Editing by Nia Williams and Stephen Coates)