War spending returned Russia's economy to growth

The Russian economy grew by 1.3% in the second quarter of 2026 compared to the same period last year. In the first quarter, Russia's GDP decreased by 0.2%, which was the first annual drop in almost three years.

According to Rosstat's preliminary estimate, in the first half of the year, the Russian economy overall grew by 0.6%. Russian Minister of Economic Development Maxim Reshetnikov stated that the country has allegedly overcome the weak dynamics of the beginning of the year and "returned to a growth trajectory".

The Russian agency explains the recovery by robust domestic demand and positive dynamics in trade, transport, and manufacturing industry. In particular, this concerns machine building, pharmaceuticals, and food production.

Government spending remains the main stimulus

Bloomberg notes that Russia's economy continues to be supported by a sharp increase in government spending, which exceeds planned budget targets. In the first seven months of the year, the volume of government procurement grew by 39%.

The strongest segment of industry remains production related to the military sector. Enterprises manufacturing drones, missiles, and other products for the Russian army are developing especially rapidly.

An additional factor was the calendar effect. In the second quarter of 2026, Russia had three more working days than in the same period last year. In the first quarter, the situation was the opposite—there were three fewer working days.

Consumption grows along with wages

Consumer demand also remained stable. Retail trade turnover in the second quarter increased by approximately 7.2% year-on-year.

Demand is supported by wage growth caused by an acute labor shortage. At the same time, double-digit rates of wage increases increase company costs and put pressure on their profits.

Oil refining declines due to Ukrainian strikes

The recovery of the Russian economy remains uneven. The oil refining industry shows the worst dynamics among large sectors.

Ukrainian strikes forced several large Russian refineries to limit or temporarily halt operations. Damage to enterprises caused fuel supply disruptions in a number of Russian regions.

Thus, the return of Russia's GDP to growth does not yet indicate a full recovery of the entire economy. The positive dynamics are largely driven by military orders, increased government spending, consumer demand, and a favorable calendar effect, while certain civilian sectors continue to contract.