Russian Scientists Warn of Recession, Revise Forecasts After Putin's Reaction

Russian economists initially sounded alarms about a looming recession and necessary budget cuts, pointing to a sharp decline in oil and gas revenues in early 2026. The Institute of Economic Forecasting of the Russian Academy of Sciences (INP RAN) projected a GDP contraction for the year, alongside a controlled devaluation of the ruble. Their preliminary estimates highlighted a nearly 50% drop in budget revenues from oil and gas in the first two months of the year.

However, after President Vladimir Putin publicly criticized the government and central bank for weak economic performance, the INP RAN swiftly revised its outlook. The updated forecast now anticipates a 0.7% GDP growth, with higher oil prices and increased demand potentially helping the Russian economy avoid the worst-case scenario. This shift suggests a response to presidential pressure rather than a fundamental change in economic conditions.

Despite the more optimistic projections, experts caution that rising oil prices alone cannot solve Russia's underlying economic problems. The INP RAN estimates that higher oil prices could boost GDP growth by a maximum of 0.5 percentage points. While this might help the government meet revenue targets and avoid a larger budget deficit, it does not address declining investment, projected to fall by 1.2% in 2026. Furthermore, a persistent downward trend in production is observed in capital-intensive sectors, including construction, building materials, metallurgy, and parts of the machinery industry.

The economists conclude that Russia's adaptive economic growth model, which relies on compensating for external limitations, has likely exhausted its potential. The strategy of redistributing resources to "priority" sectors while restricting others may no longer be sufficient to overcome systemic challenges and foster sustainable development.

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Unfortunately, economic dynamics are declining.