Russia’s economy has entered a phase of industrial recession
By the end of 2025, Russia’s economy is showing signs of deep stagnation following a two-year period of war-driven growth.
According to a report by Rosstat, 21 out of 28 key industrial sectors in Russia ended the year with negative results. The steepest decline was recorded in the raw materials sector: oil production fell to its lowest level in 16 years, while gas output decreased by 3%. Even the food industry registered a 0.5% decline for the first time in 15 years, indicating that resources to sustain domestic consumption have been exhausted.
Overall nominal industrial growth of 1.3% was ensured by only seven sectors, three of which are directly linked to Russia’s defence procurement. Output of fabricated metal products increased by 18%, electronics and optical equipment by 11.7%, and production of special-purpose transport vehicles by 32%. This imbalance confirms that Russia’s economy is being propped up almost exclusively by state military spending, while civilian sectors — including light industry and oil refining — are suffering from drone attacks and high interest rates.
Experts from the Institute for International Security Studies state that the growth model based solely on military expenditure has collapsed. Russia’s GDP growth rate has slowed fourfold to 1%, while the federal budget deficit, driven by falling oil and gas revenues, has reached 5.7 trillion roubles. This year, the budget shortfall is expected to rise to 8–10 trillion roubles, forcing Russian authorities to seek new ways to finance the war amid a shrinking real industrial base.
After three years of unexpected economic growth, Russia is now facing a sharp slowdown. War expenditures, inflation and falling oil prices have begun to weigh heavily on an economy that until recently appeared resilient to sanctions.
Household lending in Russia has fallen to a six-year low.
