Russia worsened industry forecast and expects investment decline

Russia's Ministry of Economic Development has significantly worsened its forecast for investment and industrial production for 2026. The ministry now expects a 5.4% reduction in fixed capital investment, although as recently as spring it forecast a decline of only 1.5%.

This is reported by "Vedomosti" with reference to the updated forecast of the Russian Ministry of Economic Development.

Expectations for industry have also deteriorated. Instead of the production growth of 0.6% included in the spring forecast version, Russian authorities now expect a 0.2% decline by year-end.

Actual statistics already show stagnation in the industrial sector. According to Rosstat, for January-August the volume of industrial production in Russia remained at the level of the same period last year. In August the indicator decreased by 0.6% year-on-year and by another 0.6% compared with July.

Even more noticeable negative dynamics are observed in investment. In the first half of 2026, fixed capital investment in Russia decreased by 9.9% compared with last year. For comparison, for all of 2025 the decline was 2.3%.

The Ministry of Economic Development explains the deterioration of the forecast by overall uncertainty, structural risks for the economy, and the high cost of lending. Investment plans of companies are also influenced by expectations regarding the key rate of the Russian Central Bank.

The Russian government expects that the decline in capital investment will stop only in 2027. Then the Ministry of Economic Development forecasts a symbolic investment growth of 0.2%, and in 2028 and 2029 – of 2.5% and 3% respectively.

At the same time, the ministry even slightly improved its overall GDP forecast for Russia for 2026 – to a growth of 0.6%. The Russian authorities believe that the economy will be supported primarily by consumer demand, while investment will remain a weak link in the near future. "Kommersant" notes that the government is effectively betting on an increase in household spending after several years of investment growth.

Russian economists cite problems in the fuel sector as a separate risk for industry. "Vedomosti" notes that the deterioration in the industrial production forecast is partly linked to the reduction in oil refining after damage to Russian refineries as a result of drone attacks, as well as to oil production restrictions.