Key facts
- Russia's central bank has reduced its 2026 GDP growth forecast to a range of 0.0% to 1.0%.
- The bank now projects inflation to be between 6% and 7% in 2026, a significant increase from its prior expectation of 4.5% to 5.5%.
- This revision is attributed to a substantial rise in fuel prices, described as a 'supply shock'.
- Ukrainian strikes on Russian oil refineries and logistics facilities have contributed to fuel shortages and price acceleration.
- Household, business, and financial market inflation expectations have risen, potentially hindering a sustained slowdown.
Russia's central bank has significantly lowered its economic outlook, cutting the 2026 GDP growth forecast to between 0.0% and 1.0% and projecting a faster inflation rate of 6-7%. This revision, announced by central bank head Elvira Nabiullina, is primarily driven by a sharp increase in fuel prices, which she characterized as a 'supply shock'.
The accelerated inflation and revised GDP forecast come in the wake of Ukrainian strikes on Russian oil refineries and logistics centers, leading to fuel shortages and driving up prices for various goods and services. Previously, the Bank of Russia had anticipated inflation to slow to 4.5-5.5% and had projected GDP growth between 0.5% and 1.5%.
Nabiullina acknowledged that the fuel situation represents a temporary reduction in economic capacity, prompting the downward revision of the GDP forecast. While the central bank expects fuel production capacity to gradually recover by year-end, ongoing Ukrainian actions, including recent drone strikes on facilities in Tyumen, Yekaterinburg, and Rostov-on-Don, continue to pose a risk. Inflation expectations among households, businesses, and financial markets have also risen, which the bank noted could impede a sustained slowdown in price increases.