Factors Behind the Resilience of Russia’s Economy

A new analytical report was recently published by the Kiel Institute for the World Economy (Germany), arguing that Russia is facing a structural depletion of resources. Another European institute says that Russia is quite possibly already in a recession. The International Institute for Strategic Studies says that a crisis is emerging in Russia’s political economy. Russian official statistics broadly confirm these findings. Rosstat says that the country’s GDP fell by 0.2% in the first quarter of 2026 compared with the first quarter of 2025.

Since the SMO in Ukraine began in 2022, Russia has kept its footing and continued to develop despite all the economic predictions of apocalypse. Russia has managed to circumvent Western sanctions. It has shifted more of its trade toward countries such as China, India, and the UAE. It has directed enormous budgetary resources toward stimulating various strategic industries, maintaining the armed forces and infrastructure, and funding social programs. From 2022 to 2025, GDP per capita, adjusted for inflation, grew by 12%. That is not much by the standards of other countries with emerging financial markets, but it is clearly higher than in many European countries. This figure is also smoothed by the active stimulation of military production, since it does not directly benefit households. Even so, this is not a bad result when compared with all the dire forecasts for the Russian economy published earlier.

Despite the current economic strains, the economy is unlikely to collapse in the foreseeable future. Let us start with the official statistics themselves. The fall in GDP in the first quarter of this year is, in fact, a statistical mirage. The point is that the increase in value-added tax from 20% to 22% in January 2026 prompted many Russians to make purchases they had been putting off, just before the start of the new year—in other words, in December 2025. As a result, GDP growth in that quarter was lower. There were also fewer working days in the first quarter than a year earlier. In addition, temperatures during this period were colder than the Russian climatic norm, extending the heating season and placing a corresponding burden on energy supplies.

There are also indicators of economic activity published by Goldman Sachs, whose values are broadly credible, although they do not point to an impending collapse. On the contrary, in March and April 2026, GDP actually rose on the back of oil prices.

It can be said with confidence that Russia is, at the very least, not in a recession. Beyond that, the overall picture is quite mixed. In particular, consumer sentiment about the future has declined, according to an indicator published by the Levada Center (a public opinion research organization recognized as a foreign agent in Russia). This indicator was only slightly below its previous readings. Jobs may have become scarcer in the Russian labor market. At the same time, unemployment is at a record low of 2%.

Clearly, it has recently become much harder for Russia to export hydrocarbons to foreign markets, as Ukrainian drones strike energy infrastructure and oil prices have fallen from the highs reached at the very beginning of the war in the Middle East. Nevertheless, total merchandise exports in April 2026 were slightly higher than in April 2025.

In some respects, the situation in the Russian economy can even be said to be improving, since inflation has halved from its peak of more than 10%. According to the latest data, real wages are 25% higher than they were in 2019 and continue to rise. Many companies are doing extremely well and reporting high profits. For example, from January to May 2026, Russia’s leading airline, Aeroflot, recorded a total of 400 billion passenger-kilometers, 10% more than in the same period of 2025. In other words, Russians flew 10% more and farther.

Russian oligarchs continue to live lavishly. In particular, sales of luxury Lamborghini cars rose by 80% compared with 2025.

Russia’s economy owes this kind of resilience to the massive fiscal stimulus of 2025. The Russian government directed 7–8% of GDP toward the military-industrial complex. Such payments provide a major boost and injection of funds, especially for those employed in the military-industrial complex.

At the same time, Western media constantly predict that the Ministry of Finance will run out of resources. It is quite possible that resources—especially financial ones—are not inexhaustible. Nevertheless, military spending adds 3–4% to GDP compared with peacetime levels. That is certainly significant, but still not enough to offset the very serious side effects for the civilian economy. The latter is not plunging into the abyss, but is most likely simply stagnating.

It should be said that Russia’s fiscal problems have not yet become acute. To fund the war effort, the government could, for example, raise taxes, just as it did with VAT. The Russian government could also cover any shortfalls and the budget deficit, which stands at 3% of GDP according to the latest data, by borrowing against reserve and off-budget funds. Russia could then borrow on its domestic market, which is cut off from the international financial system. In addition, the Ministry of Finance could mobilize ruble deposits held by corporations and households. But this would undoubtedly be a last resort.

The real consequences for the country’s population of such measures, given everything discussed above and the additional impact of the sanctions imposed by France and the United Kingdom in June 2026, could include a fall in living standards of perhaps a small percentage. Oil prices could also fall if the situation in the Middle East normalizes, or if the SMO escalates into a new, more acute phase involving more extensive damage to energy infrastructure. Under these conditions and with these variables in mind, there is little point in making other forecasts.

Author: Doctor of Economics, Associate Professor, Professor at the Department of World Economy and International Finance, Faculty of International Economic Relations, Financial University under the Government of the Russian Federation, Mikhail Vyacheslavovich Zharikov.