Economic performance looks increasingly unimpressive

RUSSIA ECONOMICS - In Brief 28 Aug 2025 by Evgeny Gavrilenkov

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According to Rosstat, the output of the five basic sectors, a monthly proxy for overall economic activity, grew y-o-y by just 0.2% in July and 0.9% in the first seven months of 2025, indicating a rapid slowdown. Industrial production increased by 0.7% in July and 0.8% in 7M25, though July marked the second consecutive month of a m-o-m contraction. The mining sector remained flat y-o-y in July but shrank by 2.3% over 7M25. Manufacturing recorded a modest 1.5% y-o-y growth in July, with a 3.3% increase over 7M25. Agriculture slightly declined y-o-y in July but grew by 1.0% for 7M25. Construction maintained steady growth, rising by 3.3% in July and 4.2% over 7M25 (also y-o-y). The transportation sector saw a slight drop of 0.6% over 7M25, while retail sales growth stayed consistent at about 2.0% y-o-y in both July and 7M25. Overall, the economy is showing clear signs of strain. Slowing growth is reducing federal budget revenues, and the government appears less able to boost expenditures as effectively as in previous years. A strong ruble has further dampened oil-and-gas revenues for the federal budget. With government demand weakening and private demand constrained by high interest rates, the economy faces a critical juncture. Future trends will depend on whether authorities choose to boost government spending by increasing the budget deficit and borrowing or create more room for private initiatives. However, a decision on this is unlikely to come soon. The economy will likely muddle through for some time.