Russia’s economy virtually stopped growing in 2025 amid tight monetary policy, falling investment and weakening domestic demand, increasing the risk of stagflation and entrenching stagnant trends in civilian sectors, the Foreign Intelligence Service of Ukraine reported on Wednesday, 28 January.
It is noted that in 2025, economic growth almost stopped: GDP fluctuated around zero (-0.3% in Q1, 0% in Q2, +0.1% in Q3). Even a slight revival in the middle of the year was limited to the military-industrial complex and certain segments of the raw materials industries, and did not create any impulses for the civilian economy.
Investment activity, after a brief upswing at the beginning of the year, fell sharply: in the second and third quarters, investments in fixed assets decreased by 3.7% and 1.7%, respectively.
Business has refused to modernise, cut back on purchases of equipment and investment goods, and the shortage of financial resources will persist even if monetary policy is relaxed.
In addition, additional pressure is being created by the budgetary sphere, the department noted. The state has reduced incentives through tax changes, and in 2025, maintaining high expenditures amid falling revenues led to a growing deficit.
“In 2026-2028, fiscal policy will become a deterrent factor due to spending cuts and an increase in the tax burden, consolidating an inertial scenario of prolonged stagnation with increased risks of stagflation,” the SZRU predicted.
At the same time, domestic demand remains the most vulnerable. The retail business confidence index was consistently negative in 2025, and in the fourth quarter, it fell to -6, the worst level since 2022. Against this background, 44% of retailers expect a decrease in profits and profitability in 2026, while only 29% expect sales growth – the lowest figure in a decade.
Consumer sentiment in the Russian Federation is rapidly deteriorating: since June 2025, sales have been declining in most product categories, and during the New Year holidays of 2026, shopping mall attendance fell by almost 20% year-on-year.
“The Russian retail sector demonstrates weak adaptability and structural fragility. Business pessimism, expectations of falling profitability, and reduced investment are increasingly turning into a self-perpetuating factor of the recession,” the department summarised.
