Russia's GDP contracted 1.8 percent in January and February 2026 compared with the same period a year earlier — a figure quietly released by the Economic Development Ministry that represents the first sustained contraction since the initial shock of 2022 sanctions. It is a number that matters precisely because the Kremlin spent three years insisting the war economy was holding. Economic Development Minister Maxim Reshetnikov made the ministry's position plain at a closed parliamentary session on 24 April, telling lawmakers that "our current records show that these reserves have largely been used up."
The context that makes the contraction significant is the mechanism behind it. The Central Bank of Russia has maintained its benchmark interest rate at 21 percent since late 2025 to control inflation, which reached 11.2 percent year-over-year as of March 2026, per the Federal State Statistics Service. That rate — the highest in two decades — has effectively frozen private investment. Construction starts fell 14 percent in the first quarter of 2026. Small business loan applications declined 22 percent compared with Q1 2025, according to data from Russia's Sberbank disclosed in a briefing to investors in early April.
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