The price spike was due to the new VAT rates.
Russia's GDP in January, according to the Ministry of Economic Development, was 2.1% lower than in January 2025 – this is the first decline in year-on-year terms since March 2023. The ministry explains the decline by the fact that there were two fewer working days in January, as well as severe cold weather: due to this, construction decreased by 16%, while last January was abnormally warm and the sector grew by 6%.
Even if these factors are removed, GDP is at best stagnating, experts believe: it has become colder not only outside but also in the economy.
The dynamics of the economy were weak even when adjusted for the calendar factor, analysts from "Tverdykh Tsifr" write: according to their estimates, output declined in most key sectors. Moreover, the January decline was larger in scale than the December surge (related to accounting peculiarities), they note. Taking the calendar factor into account, the situation is closer to stagnation, believes economist Yegor Susin, but economic activity has sharply slowed down.
The main driver of the economy – consumer demand – has stalled. Last year, the share of household consumption in GDP increased from 49.7% to 51.1%, but this year it has slowed down due to a spike in prices caused by the increase in VAT. The total turnover of retail trade, catering, and paid services to the population in January grew by 1.9% year-on-year after 4.1% in December (in real terms, adjusted for inflation), notes the Ministry of Economic Development. The real turnover of retail trade in January added only 0.7% year-on-year after 3.9% in December, services slowed to 2.7% from December's 3.8%, and only in catering did the growth of expenses accelerate from 9.4% to 15.1%.
After the December spike, consumer demand in January cooled more than operational indicators (data from cash register systems and the "Sberindex") suggested, analysts from "Tverdykh Tsifr" note. Economist Sergey Aleksashenko calls such sluggish growth in retail trade a surprise and points out that it "does not correspond" with the growth of real monetary incomes of Russians by 7.7% last year: "Either incomes are growing only for those who have nothing more to buy, they have everything; while for those who would like to live better, incomes are not growing."
Wage growth is slowing down. By the end of 2025, they increased by 4.4% in real terms, but in December the growth was only 2.4%. This is mainly a base effect (many companies postponed bonus payments to December 2024 before the increase in income tax), but it still indicates a more restrained growth rate, notes Susin. Consumption is also restrained by high loan rates, adds Daniil Nametkin, director of the Center for Investment Analysis and Macroeconomic Research of the CSR.
The defense industry is keeping the economy afloat. Analysts from "Tverdykh Tsifr" note that the traditional decline in industrial production after the December surge this time occurred without a decrease in output in sectors with a large share of military products: when adjusted for seasonality, they continued to grow. Estimates from the analytical center CMAC also confirm continued growth in sectors with significant defense industry presence.
In other sectors, however, the decline in economic activity was almost frontal, conclude analysts from "Tverdykh Tsifr". Nametkin highlights the decline in the metallurgy sector (-6.6%), which is pressured by low global prices and high loan rates; the production of motor vehicles (-21.3%), where consumer demand has collapsed.
Last year, Russia's GDP grew by only 1% after 4.9% and 4.1% in the previous two years. This year, the Ministry of Economic Development forecasts 1.3%, but most other forecasts do not exceed 1%: the IMF expects growth of 0.8%, the Central Bank 0.5–1.5%, the consensus forecast of the analysts surveyed by it is 1.1%, and the consensus of the HSE Development Center is 0.9%.
