Russian Economy Experiences GDP Decline in First Quarter of 2023

The Institute of National Economic Forecasting of the Russian Academy of Sciences (INEP) has released new data indicating a 1.5% drop in the physical volume of Russia's Gross Domestic Product (GDP) in the first quarter of 2023, compared to January-March of the previous year. This marks the first quarterly decline in the economy since the start of 2023, when GDP was reported to be 1.9% lower than in the corresponding period last year, as noted by The Moscow Times.

According to the Russian Ministry of Economic Development, in January, the GDP of the aggressor country decreased by 2.1%, followed by a 1.5% decline in February, resulting in an overall decrease of 1.8% over the first two months. INEP estimates that the GDP drop in February was even steeper, at 1.7%. Consequently, the GDP for the first two months of 2023 has returned to levels last seen two years ago, in January 2024.

The author of the report highlights that INEP was preparing to downgrade its annual forecast based on the data from the first two months, but the figures were so weak that the institute now anticipates further GDP contraction: a decrease of 0.7% in the second quarter and a total decline of 0.6% by the end of the year. Data from Rosstat for January-February indicate a worsening of negative trends in the economy, according to INEP.

Among the key negative indicators are a 15% decline in construction year-on-year, minimal growth in retail turnover (0.3% in February after 0.7% in January), and a drop in wholesale trade (11% in January and 4.4% in February). Additionally, the transportation sector recorded its lowest freight turnover for February since the COVID-19 pandemic. Manufacturing output decreased by 2.9% year-on-year over the two months, with declines noted in 20 out of 24 types of production. According to a survey by the Central Bank of Russia, business activity in the Russian economy fell for the first time since September 2022.

INEP forecasts a decline in industrial production of 0.8% in the first quarter compared to last year, a 0.3% decrease in the second quarter, and estimates that production will only increase by 0.3% by the end of the year. Business confidence in the retail sector is at its lowest level in at least a decade, as reported by the Higher School of Economics (HSE) Center for Economic Research. The slowdown in retail trade indicates a reduction in economic activity, according to INEP.

Sales have remained at the reduced levels seen in January, reflecting an economic cooling, analysts at Raiffeisenbank note. A significant slowdown in the food service sector in February (6.8% year-on-year after 15.1% in January) may indicate a continued saving behavior among consumers, according to INEP. Recently, there has been a trend among some Russians, particularly those with high and middle incomes, to shift from a consumer spending model to a saving model, postponing the purchase of expensive durable goods, as highlighted by the HSE Center for Economic Research.

Consumer confidence is slowly but steadily declining, as shown by an analysis of Rosstat data. An improvement in the GDP forecast for the year could be aided by additional income from exports starting in April and a potential revival in investment activity if the key interest rate is lowered, INEP suggests. However, its forecast does not yet account for the consequences of events in the Middle East. Nonetheless, the CMACR analytical center, close to the authorities, notes that these events are unlikely to benefit the Russian economy.

The center has revised its forecast for this year and the next two years, based on the assumption that the active phase of the conflict will continue until October, and that the average export price of Russian Urals oil this year will be $81.6 per barrel. Earlier reports indicated that Russian oil and gas revenues could plummet to the lowest levels since the coronavirus pandemic by 2025. The Russian budget may face a significant deficit by early 2026 due to underreported oil and gas revenues, according to the country's government.

Ukrainian intelligence has stated that the financial condition of medium and large enterprises in Russia continues to deteriorate, showing increasing imbalances in the corporate sector. More than half of large companies in Russia ended 2025 with a profit decline, cut or completely froze investment projects, and many are preparing to lay off employees. On February 24, 2026, it became known that around 300 companies in Russia are preparing to close.

For the first time in history, 74 Russian regions have found themselves in a financial hole. A wave of mass business closures has begun in Russia. The Russian Ministry of Finance has acknowledged that the hole in the aggressor's treasury is increasing at a record pace. According to Rosstat, over 17,000 Russian enterprises reported losses. VkusVill became the first major grocery retailer in Russia to begin scaling back its trading network: by the end of 2025, the company closed 286 stores. Magnit, the largest retail chain in Russia by number of stores, ended 2025 with a net loss.

On April 3, 2026, it was reported that 22 Russian industries had entered a severe downturn. The Russian clothing retailer Zolla closed 35 stores amid a sharp profit decline. Tags: Russian Economy, Russian Academy of Sciences, Russian Economic Crisis, GDP Decline.