ED – this is the first of bne IntelliNews annual series of OUTLOOK 2026 for the upcoming year, where we make a forward-looking assessment for all of the major Global Emerging Markets in Emerging Europe, Asia, Latin America, Africa and the Middle East, drawing on insightful reporting from our bureaus around the world.

What is on the agenda? What are the prospects for economic growth and what problems lie in store in the coming year? A detailed report that covers, business, economics, finance, energy, politics and the major sectors of the most important markets. ENDS

As Russia approaches the symbolic milestone of 1,418 days of war in Ukraine on January 12, 2026—the length of the Soviet Union's involvement in World War II—military progress remains limited, but the Armed Forces of Russia (AFR) retains the upper hand as the Armed Forces of Ukraine (AFU) is in slow retreat.

In 2025, Russian forces captured less than 1% of Ukrainian territory, but at the same time Ukraine faces a slow moving collapse of its defence thanks to the shortage of men, money and materiel. Moscow may not be making rapid advances but with the economy now on a full war footing it continues to enjoy a growing material advantage and ramp up military production. Military spending now accounts for 7% of GDP and the Kremlin has enough funds to continue the war for at least another two years if needs be, despite a sharp economic slowdown.

Domestically, Russia's economy showed early resilience due to high state spending and tight monetary policy. Real incomes rose in 2023–2024, but by late 2024 that model was exhausted.

Inflation surged at the end of 2024, peaking at 10%, and the Central Bank of Russia (CBR) responded with aggressive rate hikes, raising the prime rate to 21%. A policy shift in mid-2024 led to credit tightening, causing GDP growth to slow to under 1% by year-end. The slowdown was engineered and successful in that inflation began to ease, ending 2025 at under 6%, enabling the CBR to cut rates by 500bp over the course of the year.

However, economic pressures mounted. Small businesses reported a 40% drop in turnover, while corporate debt risks grew as interest payments consumed most profits. The budget deficit widened sharply to an estimated 2.6% of GDP in 2025, missing the target of 0.5%. Growth dropped close to zero in the second half of 2025 and it now seems highly likely that the Russian economy will go into recession in 2026 before resuming meagre growth in 2027 – depending on what happens with the war in Ukraine.

Despite this, Russia retains substantial reserves, including RUB11.4tn ($124bn) in the National Welfare Fund and access to RUB20tn in banking sector liquidity. In addition, hard currency reserves, a third of which is monetary gold, surged to over $700bn on the back of record prices for gold.

Looking ahead, Russia aims to shift toward more balanced growth in 2026. Russian President Vladimir Putin has revamped the National Projects 2.2 in December 2025 to make the economy “more efficient” and boost social spending in an effort to improve the quality of life. Inflation easing and modest GDP growth of 1–2% are expected in 2026.

Military expenditure is set to decline slightly under the new 2026–2029 budget but remains extremely high and will continue even if the war ends as the Kremlin begins to rebuild its stocks that have been depleted by four years of war.

The government is advancing economic reforms, including improved tax collection and productivity-focused policies. Politically, support for the war remains stable but public fatigue is growing.

On the international stage, Russia welcomed the Trump administration’s revised US National Security Strategy, which upgraded Russia's status and pledged to halt Nato expansion. This stance alarmed European leaders, who voiced concern over declining transatlantic cooperation.

Military rankings published by Business Insider in November 2025 placed Russia second globally. Analysts say Russian military capacity now far exceeds Europe's, which remains at least a decade behind in key capabilities such as hypersonic missiles and advanced aircraft.

Read the full Russia OUTLOOK 2026 report here

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