Russia\u2019s economy could slip into recession by the end of the year after three consecutive quarters of slowing growth, the Central Bank has warned.<\/p>\n
According to<\/a> the Economic Development Ministry, GDP grew by 0.6% year-on-year in July-September, following growth of 1.1% in the second quarter, 1.4% in the first and 4.5% in the final quarter of 2024.<\/p>\n The Central Bank said<\/a> the strong base effect from late last year, when there was a \u201ctemporary surge in production in certain sectors,\u201d contributed to its decision to downgrade forecasts.<\/p>\n It now expects GDP to fluctuate between a 0.5% decline and 0.5% growth in the fourth quarter. Back in July, the regulator had predicted 0-1% growth for the same period.<\/p>\n A quarterly contraction would mark Russia\u2019s first year-on-year GDP decline since the first quarter of 2023, when the economy shrank by 1.6%.<\/p>\n The 0.6% growth recorded in the third quarter came in well below the Central Bank\u2019s August forecast of 1.6%.<\/p>\n Officials said the economy\u2019s \u201coverheating\u201d is easing, but warned that labor market strain, persistent inflation above 4% and model projections all point to the overheating lasting longer than previously expected, and possibly into the first half of 2026.<\/p>\n As a result, the Bank signaled that high interest rates would need to stay in place for an extended period.<\/p>\n \u201cThe economy hasn\u2019t cooled \u2014 it\u2019s frozen,\u201d said<\/a> Anton Tabakh, chief economist at Expert RA. \u201cMany sectors are already chattering their teeth.\u201d<\/p>\n The Central Bank acknowledged that performance varies widely by sector.<\/p>\n Output has declined this year in export-oriented industries such as mining and ferrous metallurgy, while sectors serving the domestic market have largely continued to grow, though at uneven rates.<\/p>\n Defense-related industries remain the main growth driver, while most civilian sectors are in decline.<\/p>\n According to data from the Kremlin-linked Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF), production in civilian industries has been falling<\/a> steadily since the start of the year.<\/p>\n Output has dropped<\/a> across 73% of 129 key product categories, and the financial health of companies is deteriorating sharply.<\/p>\n The share of firms at high risk of losing financial stability could rise to 32.5% of total industrial revenue next year, up from 23.7% now.<\/p>\n The slowdown is also worsening the already fragile financial position of many businesses.<\/p>\n \u201cWhen demand stagnates or falls, paying high interest rates becomes nearly impossible,\u201d said<\/a> investment banker Yevgeny Kogan.<\/p>\n Business activity has declined for four straight months and only in October showed a slight rebound, driven mainly by a short-lived uptick<\/a> in services.<\/p>\n Economist Dmitry Polevoy called<\/a> it a temporary development.<\/p>\n \u201cThe overall trend of slowing growth in both industry and services remains,\u201d he said, forecasting a 0.7% GDP decline in the fourth quarter.<\/p>\n