Russia’s central bank is considering a scenario in which the country’s economy contracts for two consecutive years, with gross domestic product falling by 3–4% in 2027 and a further 1.5–2.5% in 2028. The assessment, reported on 20 September 2026 by Kommersant and cited in further reporting, points to the growing cost of the Kremlin’s continuing war and its dependence on energy revenues.
Under the risk scenario, inflation could accelerate to 11–13% and the key interest rate could return to 19–21%. Lower oil prices, tighter sanctions and a possible global financial crisis would weaken the rouble, reduce export earnings and force the state to draw more heavily on its reserves. The liquid part of Russia’s National Wealth Fund could face a substantial reduction.
A downturn built into the war economy
The Central Bank’s scenario is not presented as a certain forecast, but its inclusion in an official assessment is significant. A two-year contraction would rank among the longest downturns considered in Russia’s recent economic history. It reflects an economy exposed to several shocks at once: lower commodity prices, stronger external restrictions, falling production and the continuing transfer of vast resources from civilian activity into the military machine.
The Kremlin’s fifth year of war has therefore become an increasingly direct economic liability. Sanctions have restricted access to technology and markets, while the growing burden on the budget has narrowed the government’s room for manoeuvre. The longer the war continues, the more difficult it becomes to resolve these pressures within the existing policy framework.
The risk scenario assumes oil prices falling to between $25 and $35 a barrel, alongside additional sanctions and a possible reduction in Russian oil production and exports. That combination would strike beyond the energy sector. Lower export receipts would reduce the state’s budgetary capacity, increase pressure on the rouble and make the use of public reserves more urgent.
Reserves become a crisis fund
The National Wealth Fund is intended to provide financial protection against severe shocks. In the scenario being considered, however, its liquid assets would increasingly be used to meet the consequences of the downturn. The more that is spent to support the economy and cover budgetary shortfalls, the less remains available for a subsequent crisis.
This would leave the government balancing an enduring budget deficit against weaker revenues and higher demands for state support. Imports and private consumption could fall, while the decline in export income could also reduce production. The result would be a more vulnerable economic structure, with fewer buffers against further deterioration.
Inflation and recession pull in opposite directions
Russia would face a particularly difficult monetary policy dilemma. Bringing the key rate back to 19–21% could help contain inflation and support the currency, but it would also make borrowing more expensive at the moment businesses need investment. High rates would restrict credit, investment and consumer demand, deepening the recessionary pressure.
At the same time, measures designed to stimulate demand could add to inflation. The central bank would therefore be forced to fight two opposing threats: suppressing spending to prevent prices from accelerating, while trying to stop the economy from contracting further. In practical terms, neither side of that policy trade-off offers an easy route to recovery.
The outcome will depend on oil prices, the sanctions environment, budget decisions and the central bank’s response. The possible global shock identified in the scenario includes a crisis on the scale of 2008 and a potential collapse in the market value of companies working in artificial intelligence. Those conditions would expose the extent to which Russia remains dependent on external prices and financial stability despite claims of economic adaptation and import substitution.
The immediate question is how long the Kremlin can compensate for the cost of its war through the budget, reserves and reduced private consumption. The central bank is already modelling greater fiscal support, heavier use of the National Wealth Fund and much tighter monetary policy. That amounts to an official calculation of how to contain damage created by the state’s own strategy, rather than evidence that the underlying pressures have been resolved.
Should Russia prioritise protecting its reserves or sustaining spending to cushion households and businesses during a prolonged downturn?
