The Russian economy ended February in decline, according to data from Rosstat and the Ministry of Economic Development. Following a 2.1% drop in January, GDP contracted by another 1.5% in February, resulting in a 1.8% decline for the first two months of the year. This effectively wipes out the entire 1% growth recorded in the previous year.
Key Indicators of Collapse:
- Industrial Paralysis: Out of 28 industrial sectors, 22 reported negative growth.
- Military-Industrial Recession: Even the production of “finished metal products” (a proxy for bombs and shells) fell by 1.9% year-on-year, indicating capacity limits and resource shortages.
- Consumer Stagnation: Retail trade growth slowed to a near-halt at 0.3%. High interest rates and tax hikes (VAT and excises) have forced the population into “survival mode.”
- Investment Freeze: With corporate profits down 30%, about 80% of large businesses—including giants like Lukoil and Severstal—have frozen or slashed their investment programs.
Analytical Summary:
The start of 2026 marks the exhaustion of the “military Keynesianism” model. The military-industrial complex is no longer serving as an economic engine; it has hit a ceiling of labor shortages, worn-out equipment, and restricted access to components. The surge in oil prices due to the Iranian conflict may bring in $40 billion, but as experts warn, this “rent” will remain locked within elite circles and the defense sector, failing to reach the broader economy or curb the deepening recession.