MOSCOW (Realist English). The Russian economy continues to adapt to external challenges, showing a mixed picture. A slowdown in economic growth and industrial stagnation coexist with record-low unemployment and efforts to contain inflation.
High oil prices, driven by the Middle East conflict, are providing the budget with additional oil and gas revenues; however, a strengthening ruble and export difficulties are holding back their growth.
General Economic Picture
According to Rosstat, Russia’s GDP contracted by 0.2% in the first quarter of 2026 compared to the same period last year.
President Vladimir Putin noted at a meeting on May 15 that government measures were beginning to show “a certain positive result,” but called for priority attention to supporting economic growth.
Economy Minister Maxim Reshetnikov emphasized that the economy is coping with challenges, inflation is falling, and unemployment remains at minimal levels.
Retail trade is experiencing a crisis: in the first quarter of 2026, the sector hit three historic lows. The Economy Ministry forecasts retail trade turnover growth of just 0.8% in 2026 (compared to 4.1% the previous year). The clothing and footwear market could lose up to 40% of its stores by the end of 2026.
Oil and Gas Revenues
Due to rising global energy prices amid the Middle East conflict, Russia’s oil and gas revenues in May 2026 increased by 39% compared to the same period last year, reaching approximately 700 billion rubles.
A decline of about 17% is expected compared to April, due to the cyclical nature of the Mineral Extraction Tax (MET) payment, the strengthening of the ruble, and large reverse excise tax payments to oil companies.
In April, tax revenues from oil and gas amounted to 855.6 billion rubles – 238.6 billion rubles (39%) more than in March. However, for the first four months of 2026, the decline in oil and gas revenues compared to the same period last year remains at 38.3% (to 2.298 trillion rubles).
The 2026 budget includes oil and gas revenues of 8.92 trillion rubles out of total revenues of 40.283 trillion rubles.
Economists note that the ruble exchange rate is of key importance: the weaker the national currency amid high oil prices, the higher the ruble-denominated budget revenues from raw material exports.
Metals Market
On the global non-ferrous metals market from May 13 to 18, prices fell by 3.1% due to lower quotes for aluminum (-2.5%), copper (-3.8%), and nickel (-2.9%). At the same time, on an annual basis, the value of these metals increased by 36.2%.
The MetalTorg.Ru metals trading composite price index rose by 4.8 points (0.6%) over the week; however, four out of ten types of steel products were in negative territory.
Aluminum on the London Metal Exchange (LME) is trading around $3,578 per ton, copper slightly higher, nickel is down 1.33%, and platinum and palladium are also showing negative dynamics.
Ruble Exchange Rate, Inflation, and Key Rate
The official dollar exchange rate on May 20 was 71.3 rubles, and the euro was 82.8 rubles. By May 25, the dollar had fallen to 71.2 rubles, and the euro to 82.5 rubles.
Annual inflation as of May 18 was recorded at 5.36%. During the week of May 13–18, the overall price level fell by 0.02%, continuing the deflationary trend.
In April, monthly inflation was 0.14%, and annual inflation was 5.58% (down from 5.86% in March). The Economy Ministry raised its 2026 inflation forecast to 5.2%.
The key interest rate remains at 14.50% per annum. The Bank of Russia maintained its GDP growth forecast for 2026 in the range of 0.5–1.5%, expecting annual inflation to return to 4.5–5.5% in 2026 and to the 4% target in 2027.
Labor Market
The unemployment rate in Russia in February 2026 fell to 2.1% (about 1.67 million people), a historic low. Deputy Prime Minister Alexander Novak forecasts unemployment will remain within 2.3–2.4% over the course of 2026.
Stock Market
The Moscow Exchange Index closed below 2600 points on May 25, at 2,598.2 points (-1.1%), hitting a low not seen since November 2025 amid falling oil prices and heightened tensions in the Ukrainian conflict. The RTS Index stood at 1,144.01 points (-1.5%).
Conclusion
The Russian economy presents a mixed picture. On one hand, there is record-low unemployment, high oil prices, and additional oil and gas revenues supporting the budget.
On the other, there is industrial stagnation (the manufacturing sector has been falling for the 11th consecutive month) and a retail trade crisis. The key challenge remains maintaining sustainable economic growth and containing inflation while keeping monetary policy tight.