Russia is continuing to experience a large-scale investment crisis, with capital spending falling 2.3% last year. In the first half of 2026, investment fell by almost another 10%. Under the government’s baseline scenario, the overall decline in capital spending this year should be limited to 1.5%. Under the negative scenario, however, the authorities expect an annual investment slump of 3.5%. Ukrainian attacks could help slow the investment decline, officials suggest, because the more facilities are destroyed, the more new capital spending will be required.
Despite nominal growth, real investment remained in negative territory in the second quarter of this year, falling 6.6% from the same period a year earlier, according to the Macro Markets Inside (MMI) Telegram channel, founded by current Central Bank adviser Kirill Tremasov. Investment fell 14.3% in the first quarter. Taking this into account, the MMI authors calculated that capital spending declined by about 9.9% in the first half of the year. Their assessment almost exactly matches that of Yevgeny Suvorov, an economist at CentroCredit Bank. Suvorov, however, puts the second-quarter decline at 6.4%.
It is worth recalling that the 2026 investment crisis was already factored into the government’s economic development scenarios for budget planning a year ago. In May this year, those official scenarios were significantly revised downwards. The investment decline for the year was estimated at 3.5% under the conservative scenario, while under the government’s baseline scenario capital spending was expected to fall 1.5%.
The current pace of investment decline is now at least three times worse than under the government’s conservative scenario and six times worse than in its baseline projections
Investment in fixed assets in Russia as a percentage of the same period a year earlier, at constant prices.
Source: Macro Markets Inside (MMI) Telegram channel
By the end of the year, however, official investment statistics could improve as facilities destroyed by Ukrainian drones are rebuilt. This possibility is explicitly mentioned in the Central Bank’s Comments on the Medium-Term Forecast. ‘In the second quarter of 2026, investment activity, according to the Bank of Russia’s estimates, shifted to sequential growth [growth compared with the previous quarter, Nezavisimaya Gazeta]. Going forward, the Bank of Russia continues to forecast an expansion in investment activity, including under the influence of the accumulated effects of monetary policy easing. Spending on restoring production capacity in certain industries will make an additional contribution to investment growth in the second half of the year,’ Central Bank officials wrote in August.
Under this logic, the more money that has to be spent on ‘restoring production capacity’, the better the overall investment growth figures will look. Whether this forced increase in capital spending will be presented as evidence of a healthier Russian economy remains unclear. But officials’ task of launching a new investment cycle has not been abandoned
The Russian authorities must launch a new investment cycle so that businesses can invest in developing different areas of the country’s economy, President Vladimir Putin said at a meeting of the Council for Strategic Development and National Projects on August 19. The president explained that many major projects had entered or completed their main investment phase since last year, slowing the overall pace of capital spending
‘Our task now is to give businesses additional opportunities to invest in the development of industry, agriculture, services and housing construction,’ Putin said.
Russia’s new investment cycle will be linked to the development of domestic technologies, artificial intelligence and robotics, Economy Minister Maxim Reshetnikov said. The minister noted that Russia is currently going through an investment pause ‘because many export-oriented projects are nearing completion or have already passed the peak of their main investment phase’.
‘And the question for the next wave, the next stage, is what these projects will be and what technological base they will use,’ Reshetnikov said.
The government’s approved Plan for Structural Changes in the Russian Economy through 2030 calls not for a decline in investment but for growth. Under the plan, Deputy Prime Minister Alexander Novak is responsible for ‘improving the investment climate’, to be measured by ‘the increase in fixed-asset investment compared with 2020’. The plan envisages investment rising continuously, with growth from the 2020 level of 36.6%, 39% and 42.1% in 2024, 2025 and 2026 respectively. Alongside Novak, the Economy Ministry under Maxim Reshetnikov is also responsible for ensuring uninterrupted investment growth under the structural-change plan (see Nezavisimaya Gazeta, May 12, 2026).
Whether investment can grow in an economy where business revenues are falling, the tax and administrative burden is increasing, civilian production is shrinking and exports are becoming more difficult is another question.
Among supporters of ultra-tight monetary policy in Russia, a familiar argument is being repeated: for investment growth to begin, the cost of borrowing must be raised in the name of fighting inflation
‘Extremely high inflation in investment goods is eating up all real investment growth. Business surveys show that the main obstacle to investment is high inflation, along with general uncertainty. So without suppressing inflation, it will be impossible to restart the investment cycle. And as for the recipe for bringing inflation back to target, you already know it,’ economist Suvorov wrote.
ORIGINAL: NG/Investment Slump Turns Out to Be Far Worse than Expected
