MOSCOW – The Russian economy shrank by 0.2 per cent in the first quarter of 2026, its first quarterly contraction in three years amid mounting strain from the Ukraine war and sanctions, official data showed May 15.
This compares to an expansion of 1.4 per cent between January-March 2025, data from Russia’s Rosstat statistics service showed.
The Kremlin has spent heavily on its offensive in Ukraine – outlays that initially boosted economic growth but have driven up inflation and caused labour shortages in non-military sectors of the economy.
Earlier this week, Russia slashed its growth forecast for 2026 to 0.4 per cent from 1.3 per cent.
Russian President Vladimir Putin said earlier on May 15 that economic growth had returned in March after two months of contraction.
“It is essential that the emerging positive trend be consolidated and extended to more and more industries and sectors,” he told economic officials.
Russia’s central bank said on May 14 that the contraction in the first quarter could be a one-off occurrence, as heavy snowfall in January and February disrupted construction and dampened consumer activity.
Higher oil prices on the back of war in the Middle East have offered the Russian economy some short-term respite, but structural issues such as stubborn inflation, labour shortages and bloated military spending remain.
Ukrainian attacks on oil infrastructure have also weighed on Russian crude exports in recent months.
The central bank has kept borrowing costs elevated to tame inflation.
This has hit businesses across the board, with large corporations laying off staff and asking for state aid, and smaller companies forced to close.
The war has also thinned Russia’s state finances.
Moscow has run a deficit every year since it ordered troops into Ukraine in 2022.
In the first three months of 2026, Russia’s budget deficit already exceeded its forecast for the entire year, soaring to the equivalent of US$60 billion (S$76 billion), or 1.9 per cent of gross domestic product. AFP
