As the war in Ukraine drags on, the economic-policy debate in Russia has shifted from celebrating war-driven growth to arguing over whether the economy is stagnating or has entered a recession.
In the first quarter of 2025, gross domestic product declined by 0.6% compared to the previous quarter, and then grew by only 0.4% in the second quarter. Even the most optimistic forecasts expect Russia’s growth to be around 1% in 2025, down sharply from 4.3% in 2024 and 4.1% in 2023.
Despite this deceleration, inflation remains a challenge. As a result, the Russian Central Bank recently lowered its policy rate by 100 basis points — a smaller-than-expected cut — to 17%. Russian consumers are already feeling the pinch. Car sales, for example, are forecast to fall by 24% this year.
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