Paul Goble
Staunton, Dec. 16 – In its latest quarterly assessment of the current situation of the Russian economy and its prospects, the Institute of Economic Forecasting of the Russian Academy of Sciences says that the Russian economy is in decline in all sectors except the military industry one and that this negative trend will continue into 2026 and possibly beyond.
Overall, the institute says, economic growth in Russia ended more than a year ago in November 2024, although this was hidden from casual observers by military spending. But now there is no question that the Russian economy is in recession and will remain there for some time (ecfor.ru/publication/kvartalnyj-prognoz-vvp-vypusk-68/).
This trend reflects more than just the shift to military spending. “Unfavorable demographic trends are exacerbating labor shortages, the technological gap with developed countries and China is increasing, and revenues from hydrocarbon exports and resource rents” are also having an impact, the institute continues.
Moreover, high interest rates “are eating away at the main investment resource” companies have – their own funds. As a result, “corporate profits in real terms decreased by 15.6 percent in the first nine months of 2025 and the radio of interest payments to profits approached 60 percent.” In addition, “the debt burden rose significantly” across the board.
“In the third quarter,” the institute reports, “Rosstat reported a real decline in investments for the first time since 2022, by some 3.1 percent year on year,” with the greatest declines in capital expenditure being on infrastructure where spending fell one percent and equipment and machinery where it fell 15 percent.”
And the institute concludes: “this decline in investment activity will lead to an even greater decline in output, and that will be followed by a reduction in employment and consumer demand and an increase in past-due debt of the population and business. In the worst-case scenario, that will result in a crisis of non-payments.”