BOFIT Forecast for Russian Economy 2025–2027

The needs of war, labour shortages and slower growth in public spending will restrain growth of the Russian economy throughout the forecast period. Growth this year has also been hindered by falling oil prices, significantly reducing government tax revenues.

Our current forecast expects public spending to support domestic demand, and especially production in sectors linked to the war effort. Growth of the other sectors of the economy will be limited by labour shortages and tightening borrowing constraints. Barring significant changes in Russian domestic policy or major external shocks, we see Russian GDP growing at only about 1 % a year throughout the forecast period.

The downside risks to this forecast increase as the macroeconomic imbalances Russia worsen. While it is becoming harder to channel economic resources to sectors serving the war effort, it is still not impossible. A longer pause in military activities would provide a welcome respite for the Russian economy, but the significant role of the military-industrial complex is unlikely to diminish any time soon.

“Russia’s latest episode of high economic growth is over. Towards the end of the forecast period, we expect to see the Russian economy being more vulnerable with its growth prospects worse than before the invasion of Ukraine. Even so, Russia can still sustain the war at current levels and guarantee sufficient living standards for most of the population”, notes senior advisor Laura Solanko.