Russia’s Central Bank Lowers GDP Outlook and Warns of Rising Inflation

The Central Bank of Russia has adjusted its inflation forecast for 2026, now projecting a rate of 6–7% due to a substantial rise in fuel costs. This marks an increase from the previous estimate of 4.5–5.5%.

According to a press release from the Bank of Russia, inflation expectations among households, businesses, and financial market participants have climbed. The bank warned that if these elevated expectations persist, they could prevent inflation from cooling effectively.

“The fuel situation constitutes a supply shock,” stated Elvira Nabiullina, Governor of the Bank of Russia, during a press conference. Fuel price growth has accelerated since mid-May, and several Russian regions experienced shortages in June following Ukrainian strikes on Russian oil refineries.

Some analysts suggest that inflation in Russia could escalate even further by year-end, potentially driven by Ukrainian military strikes on Russian logistics centers.

The regulator has also revised its GDP growth projections for 2026 downward, lowering the forecast from 0.5–1.5% to 0.0–1.0%. This includes a reduction in the projected fourth-quarter growth, which has been adjusted from 1.0–2.0% to 0.0–1.5% year-on-year.

“Real-time data suggests companies expect a slowdown in demand. Given the temporary reduction in economic capacity, we have lowered our GDP growth forecast,” Nabiullina noted.

While the Central Bank anticipates that fuel production capacity will be gradually restored by year-end, Ukraine continues to employ “long-range sanctions” in response to Russian actions. On Saturday, Ukrainian drones struck an oil refinery in Tyumen, a logistics facility in Yekaterinburg, and a fuel and lubricants depot in Rostov-on-Don.

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