Economic growth picks up in the fourth quarter of 2025

Q4 GDP growth matches 2025 full-year expansion: The first official estimate of Russia's GDP for Q4 showed that the economy expanded 1.0% in annual terms, following an upwardly revised 0.8% expansion in the previous quarter. Q4’s reading matched the preliminary estimate by the Ministry of Economic Development released in early February. In seasonally adjusted quarter-on-quarter terms, GDP grew 0.7% in Q4, following 0.3% growth in the prior quarter. The second estimate of full-year growth confirmed that GDP expanded 1.0% in 2025 (2024: +4.9%)—the weakest pace since 2022.

War-related manufacturing remains a key driver: Relative to the prior period's data, figures in Q4 improved for the agricultural sector (+4.5% in annual terms vs +1.7% in Q3), the manufacturing sector (+4.3% vs +3.1% in Q3), the wholesale and retail trade sector (-0.6% vs -1.9% in Q3) and the real estate sector (-0.5% vs -1.3% in Q3). In contrast, the reading for the public administration and defense sector softened in Q4 (+4.5% vs +5.0% in Q3). Manufacturing—which has been largely military-oriented since the start of the war with Ukraine—domestic trade plus the public administration and defense sector contributed the most to GDP in the quarter. On the expenditure side, private consumption accelerated from the prior quarter, driven by frontloaded spending ahead of a 2026 VAT hike, while growth in government consumption softened from Q3, and fixed investment fell at the sharpest pace in over five years.

Growth is seen broadly stable in 2026: Our Consensus is for annual GDP growth to have hit a three-year low in Q1 2026 and fall below the already weak 2025 rate in 2026 as a whole. Private consumption should lose steam on softer wage growth, a weaker ruble and a VAT hike, offsetting accelerating public spending. Moreover, fixed investment should weaken further from 2025. Meanwhile, exports are expected to rebound from a projected contraction in 2025, potentially boosted by rising hydrocarbon exports amid global shortages from the Middle East and the temporary lifting of sanctions on Russian oil at sea. Production-wise, defense manufacturing should remain a key driver. However, the protracted conflict with Ukraine will continue to weigh on GDP growth through labor shortages, a brain drain, Western sanctions, largely war-oriented fiscal spending, weak private investment and subdued non-war industrial production. Peace talks with Ukraine are key to monitor, while higher-for-longer energy prices are an upside risk, as they would boost budget revenue.

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