Conditions for economic growth in Russia are set to worsen as fuel prices rise, utility tariffs increase and risks mount for businesses in the new economy. Russian companies are expected to face a further deterioration in their financial performance because of higher logistics costs following reduced fuel production and damage to warehouse infrastructure, economists warn. Even so, the economic downturn seen at the start of the year appears to have been overcome, with GDP expected to grow by several tenths of a percentage point in 2026. Officials are meanwhile searching for positive economic indicators and point, among other things, to stronger inbound tourism in the first half of the year.
According to economists at the Institute of Economic Forecasting of the Russian Academy of Sciences, companies are increasingly being forced to cut spending on wages, outsourced services and investment programmes. The need to reduce costs stems from payment delays by counterparties, the slow pace of key interest rate cuts and expectations of weaker consumer demand growth. Corporate financial results are also deteriorating because of rising logistics costs caused by lower fuel production, higher fuel prices and damage to warehouse infrastructure during the military campaign. Together, these factors could lead to a further downgrade of Russia’s 2026 growth outlook. For now, the institute forecasts GDP growth of around 0.8% in 2026, a more optimistic estimate than the government’s official forecast. In May, the Ministry of Economic Development lowered its forecast for 2026 GDP growth from 1.3% to 0.4%.
The risk of large warehouses being destroyed is a new factor that fundamentally changes the prospects for emerging sectors of the Russian economy, although many have yet to appreciate its significance. Many Russians assume that the destruction of Wildberries warehouses and distribution centres is measured simply by the value of the buildings and lost goods. In reality, however, the loss of major logistics hubs calls into question the viability of modern business models whose competitiveness depends on reducing costs through the concentration of production and logistics.
‘A platform economy based on large warehouses and distribution centres works well in peacetime. Under current conditions, however, it is virtually impossible to guarantee the protection of such large facilities. As a result, large warehouses and production sites become vulnerabilities. Reducing that vulnerability requires decentralisation, which inevitably lowers the economic efficiency of business operations,’ said Vladimir Boglayev, Director of the Cherepovets Foundry and Mechanical Plant.
Many experts argue that infrastructure must be redesigned to withstand wartime conditions. Speaking at the recent St. Petersburg International Economic Forum, MGIMO professor Andrey Bezrukov said the economy should be built not only to support development but also national defence.
‘Our new critical infrastructure must be protected. Oil storage facilities, communications hubs, data centres and similar assets should either be underground or heavily protected. We need infrastructure capable of surviving the kind of war being imposed on us,’ Bezrukov said.
For now, however, officials continue to spend substantial sums rebuilding warehouses and oil storage facilities that repeatedly become easy targets. Many experts argue that reconstructing destroyed logistics hubs makes little sense from either a military or an economic perspective.
Despite military attacks and an overall decline in efficiency, the Russian economy remains capable of recording modest growth.
ORIGINAL: NG/Russian Companies Face Further Deterioration in Financial Performance
