BOFIT Forecast for Russia 2026–2028: Economic growth at last year’s level in 2026

Growth maintained at one per cent this year, slowdown in 2027-2028

Slower growth in private demand and lack of growth in fixed investment dampens economic growth. Growth in real wages slows, and the ability of companies to invest is curtailed by low profits and tight monetary policy. Moreover, state induced fiscal stimulus will no longer foster economic growth witnessed over previous years as Russian labour force continues to be close to full use. High prices for commodities will maintain economic growth this year, but the effect fades in 2027-2028.  Our latest forecast assumes sanctions pressure remains at the same level as at the start of 2026, and that the Russian economy otherwise experiences no other significant external or internal shocks during the forecast period.

BOFIT senior economist Sinikka Parviainen: “Throughout the 2026–2028 forecast period, we expect the trajectory of the Russian economy to separate further into military industries and a struggling civilian economy. The government will maintain investment in the military-industrial complex as other investment is allowed to wither. Unless a private firm is involved in the military supply chain, it is unlikely to make significant investments. For this reason, growth in fixed investment overall will grind to a standstill.”

Uncertainties related to the forecast are extremely high

The trends in private demand, global commodity markets, growing public sector challenges and maintaining a wide sanctions pressure pose significant risks to our baseline forecast. A change in private demand would have a large impact on the Russian economy, and most risks are on the downside. For example, in the event of a significant slowdown in wage and income trends and an erosion of consumer confidence, the development of the Russian economy would be significantly worse than our baseline forecast. At the same time, covering public sector shortfalls becomes increasingly challenging if the war continues and sanctions pressures are expected to remain in place.

Higher growth or limiting factors could possibly come from a traditional source – global crude oil markets. Russian oil exports this year are still subject to hefty sanctions, the country’s oil refining capacity is impaired by drone and missile strikes and export volumes have declined. On the other hand, an ongoing disruption of sea traffic in the Strait of Hormuz and the temporary lifting of sanctions on Russia could keep the export price on Russian oil higher and longer than expected.

The full text of the forecast is posted in English at BOFIT Forecast for Russia 2026–2028.