The Russian economy has begun to contract, with Sberbank revising its gross domestic product (GDP) growth forecast down to between 0.5 per cent and 1 per cent. This reduction from an earlier estimate of 1 per cent to 1.5 per cent follows a disappointing first-quarter performance.
As Russia’s largest bank, Sberbank’s updated forecast comes ahead of the Economy Ministry’s preliminary GDP estimate, expected to be released on Wednesday, along with initial data from the statistics agency on May 15.
In January and February, the economy contracted by 1.8 per cent, driven by a combination of high interest rates, increased taxes, a strong rouble, and reduced prices for Russian oil. Sberbank’s Deputy CEO, Taras Skvortsov, remarked, “The situation in the first quarter of the Russian economy was challenging against the backdrop of tight monetary conditions.”
The contraction has hit several sectors particularly hard. Mining and manufacturing saw significant declines, while consumer spending has slowed markedly, impacting retail trade. Skvortsov noted that the construction sector also stagnated during this period.
Looking towards the future, Sberbank anticipates inflation in 2026 will range between 6 per cent and 6.5 per cent, which is notably higher than the central bank’s forecast of 4.5 per cent to 5.5 per cent. This disparity illustrates the challenging economic landscape facing Russia.
