Russia’s Economic Growth Plummets as Key Sectors Enter Recession, Experts Warn of Decline

Russia’s economy is sinking deeper into stagnation, with GDP growth in August 2025 hitting only 0.4%, down from 1.1% in the second quarter, and a sharp decline from 4.3% last year. This marks the second month of near-zero growth, with many sectors outside defense in recession, The Moscow Times reported on October 2.

The chemical industry saw a 2.3% drop, and production in textiles, furniture, oil products, food, and metallurgy also declined.

Economist Sergey Alexashenko told The Moscow Times that Russia’s economy “looks bad,” with growth concentrated in unproductive sectors. Defense factories are boosting output for the war in Ukraine, but economists warn this growth is unsustainable.

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The government has cut its 2025 GDP growth forecast from 2.5% to 1%, with next year’s forecast at just 1.3%.

The war has forced a tough decision: continue military spending or invest in the civilian economy. Experts warn rising defense costs and shrinking resources limit Russia’s economic diversification.

To fill the budget gap, the government plans to raise VAT (up to 22%) and small business taxes in 2026, but this could further slow economic activity.

Despite stagnation, economist Vladislav Inozemtsev argues it won’t spark political fallout, as Russians have endured economic hardship without demanding change.
“In the West, zero growth causes panic. In Russia, it is simply the norm.” he said.

Previously, it was reported that Russia’s economy had reportedly come to a halt. Experts from the Institute of National Economic Forecasting (INEF) of the Russian Academy of Sciences conclude that the country’s GDP growth is stagnating.

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