Russia’s economy may have shrunk in the first quarter of 2025, marking its first contraction since mid-2022, experts say. Analysts suggest the decline is linked to government measures aimed at controlling inflation and stabilizing the economy, which has been overheating due to the ongoing war.
The first-quarter contraction could signal significant challenges for Russia’s economic recovery. A recent report from Vedomosti business newspaper, citing economists, predicts a drop in the country’s Gross Domestic Product (GDP) for January through March 2025.
Key Factors Behind the Projected Contraction
According to Raiffeisen Bank, Russia’s GDP declined by 0.3% during the first quarter compared to the previous quarter. This follows a 1.3% rise in the final quarter of 2024. In contrast, Bloomberg economist Alexander Isakov has forecasted a sharper drop of between 0.6% and 1.5%.
The main reasons behind the expected contraction include weak industrial output and lower oil prices. As a major oil producer, Russia’s economy heavily relies on the energy sector, and falling prices have contributed to the slowdown.
Government Efforts to Stabilize the Economy
Russian President Vladimir Putin has acknowledged the current economic challenges, describing the government’s measures as a “planned corrective.” These steps are intended to stabilize the economy by reducing inflation and managing the country’s economic overheating.
Despite these efforts, some experts warn that the government might be overcorrecting, potentially causing further economic strain. As the global economy continues to recover from the pandemic and the impact of the war, Russia faces unique obstacles in its recovery.
Economic Development Ministry’s Outlook
While experts forecast a downturn in the first quarter, Russia’s Economic Development Ministry remains more optimistic. The ministry estimates a seasonally adjusted year-on-year GDP growth of up to 2% for the first quarter of 2025. However, this estimate could be revised when official data is released by Rosstat, the state statistics agency.
Looking ahead, the ministry projects GDP growth of 2.5% for the full year 2025, down from 4.3% in 2024. However, many analysts believe this projection is too optimistic given the current economic headwinds.
Official Data to Be Released Soon
Russia’s government will release official economic data on May 16, which will provide more clarity on the country’s economic performance in the first quarter of 2025. The data will help confirm whether the expected contraction actually occurred.
If the figures confirm the predicted decline, it would be the first time since the second quarter of 2022 that Russia’s economy has contracted on a quarterly basis.
Global Impact and Future Outlook
Russia’s economic challenges also have broader implications for the global economy. As one of the world’s largest energy exporters, the country’s economic performance can impact global oil and gas prices. Additionally, any further economic downturn could affect Russia’s role in international trade and geopolitical relations.
Economists will be closely watching Russia’s recovery efforts throughout 2025. Despite the government’s efforts to stabilize the economy, the risks of inflation, industrial decline, and fluctuating oil prices remain significant.
