The World Bank has sharply revised its economic outlook for Russia, cautioning that the country’s economy is heading toward prolonged stagnation rather than a “managed slowdown.” The lender now forecasts Russia’s GDP to grow by just 0.9% in 2025, a significant cut from its previous 1.4% forecast in June, with growth projected to remain under 1% annually through 2028. Key factors driving this downward revision include falling oil prices, weaker exports, and high domestic interest rates, which have constrained private demand and investment. Furthermore, the expiration of large-scale fiscal stimulus and a persistent labor shortage are expected to severely limit the potential for increased output.
This grim forecast contradicts the Russian government’s more optimistic official projections, which anticipate growth accelerating to around 2.5-2.8% later in the decade. However, the World Bank’s perspective is echoed by other independent analysts and business leaders. The Kremlin-aligned think tank CMACP expects only 0.7-1% growth this year, while Russian Union of Industrialists and Entrepreneurs head Alexander Shokhin noted that the economic cooling is neither “soft” nor “controlled.” The bank also anticipates the budget deficit to widen to 2.9% of GDP this year, exceeding the Finance Ministry’s 2.6% forecast.The most concerning indicator is the widening divergence between the military and civilian sectors. While the defense-linked industries continue to be a source of growth, estimates from CMACP show that output in non-military industries has fallen 5.4% so far this year, leaving nearly a third of Russia’s non-military companies under severe financial stress. This structural imbalance suggests that the current war-driven economic model is unsustainable, as high borrowing costs, sanctions, and labor scarcity cripple the rest of the economy and cement a trajectory toward long-term low growth and high inflation.
