Russian citizens welcomed the new year with a noticeable rise in prices due to adjustments in utility tariffs, seasonal factors, and changes in tax legislation.
New tariffs for housing and utilities services came into effect on January 1, 2026, with the average adjustment rate across the country being approximately 10-12%, depending on the region.
An increase in excise taxes on alcohol, tobacco products, and sugar-sweetened beverages also led to higher prices for these goods, in addition to rising public transportation fares in many cities, particularly in Moscow and St. Petersburg.
The traditional seasonal increase in prices for fruits and vegetables, along with rising logistics costs, put additional pressure on prices.
Compared to the average prices at the end of 2025, the price of gasoline rose by approximately 1.5% to 2% in just the first two weeks of this year.
This comes as pessimistic expectations accelerate regarding the chances of an improvement in the performance of the Russian economy this year.
Risk of Sliding into a Deep Crisis
A deputy stated that Russia failed last year to lay the foundations for the expected growth in 2026, adding that there are no indicators of an improvement in the situation.
The deputy did not rule out an economic recession in 2026, pointing out that 2025 “left a bad legacy,” and that the economic situation saw almost no growth with inflation reaching 6%.
They expressed regret over the lack of domestic production and companies temporarily ceasing operations due to rising costs of key resources.
The deputy said that “the number of companies closing is twice the number of those opening their doors,” explaining that sanctions and Russia’s heavy reliance on imported goods “pushed it to abandon its addiction to oil, but it has become addicted to raw materials, selling ores, coal, and metals.”
For its part, the government and Russian analysis centers expect the current year to be characterized by high interest rates, low economic growth, and significant instability due to the geopolitical situation and global trade tensions.
In light of this, the Ministry of Economic Development has lowered its forecast for GDP growth in 2026 to 1.3%.
According to the ministry, as a result of tight monetary policy, investment activity will decline by 0.5% next year, and consumption growth will slow to 1.2%.
The Central Bank’s baseline scenario assumes that GDP growth in 2026 will remain in the range of 0.5-1.5%.
Reasons for the Decline in Economic Growth
A researcher at a macroeconomic analysis center expects the Russian economy to face a period of slowdown following a phase of expansion in military spending.
According to the researcher, the main reasons for the expected slowdown in economic growth this year primarily revolve around the fading stimulative effect of the “massive” government injection into the defense sector, where the redirection of resources towards defense industries has led to structural imbalances, limiting the growth of civilian industries.
The speaker adds to these factors the Central Bank’s tight monetary policy, maintaining a high key interest rate to combat inflation, which in turn has raised the cost of corporate loans, thereby reducing investment activity and demand.
The researcher considers that the decline in global energy prices and the tightening of sanctions have led to a drop in oil and gas revenues by more than 25%.
They explained that mobilization and population displacement have also exacerbated the labor shortage, which has become one of the most important obstacles to production expansion, adding that raising taxes to cover the budget deficit increased the level of corporate costs and accelerated inflation.
