BOFIT Forecast for Russia 2024–2026 / 2

Abstract

Russia has posted a stronger-than-expected economic performance in the first half of 2024. Defying our earlier forecast, the capital stock and private consumption grew more rapidly than expected. Accordingly, we have revised upwards our growth outlook to 3½ percent for this year. In the second half of this year, we expect slowdown in economic growth due to Russia’s stretched labour supply and production capacity constraints. Russian economic growth should decelerate further in 2025 and 2026 to around 1 % p.a., a level close to the economy’s long-term potential growth rate. Higher growth would require a substantial increase in productivity, which seems unlikely given that a considerable share of investment is already dedicated to branches serving the war effort either directly or indirectly. Tighter sanctions have also impaired Russia’s access to critical technologies.