Russia’s economy contracted by 0.3% quarter on quarter in 1Q25 in seasonally adjusted terms, marking the first quarterly decline since 2Q22, Vedomosti daily reports citing estimates by Raiffeisenbank.

As followed closely by bne IntelliNews, the signs of a slowdown in Russia are clear, with analysts guessing whether the economy overheated by the full-scale military invasion of Ukraine is headed for a “soft” or “hard” landing.

This week the Ministry of Economic Development said that Russia’s economy grew by 1.7% year-on-year in 1Q25 in unadjusted terms. But in seasonally adjusted terms the GDP growth in 1Q25 was actually negative, according to Raiffeisenbank and other analysts surveyed by Vedomosti.

Renaissance Capital also wrote in the note for clients on May 6 that “seasonally adjusted GDP growth in 1Q25 was negative relative to 4Q24”.

The Central Bank of Russia (CBR) predicted a slowdown for this year since it issued a pessimistic medium-term macroeconomic outlook at the start of August last year. In an effort to bring down sticky high inflation it introduced a series of non-monetary policy measures last year to artificially cool the economy, but it appears it may have overshot as external shocks of falling oil prices, which dropped below $60 a barrel a day earlier, and the chaos the Trump administration tariff policy have bounced back to hit the Russian economy.

A debate has been raging over the last nine months. Some economists believe that Russia will be hit by a wave of bankruptcies later this year, while others say the economy is more robust than it appears. However, the latest results suggest the centre of gravity has shifted to the negative end of the spectrum. Russian Finance Minister Anton Siluanov almost admitted as much earlier this week when he tripled the federal budget deficit forecast for this year and dropped the outlook for average oil prices in 2025 to a mere $56 per barrel from $62.2.

Bloomberg’s Alexander Isakov estimates the contraction at 0.6%–0.8% q/q, while T-Investments’ Sofya Donets puts the decline at up to 1.5%. The most vulnerable sectors in the ongoing slowdown are industrial production, extraction, and transportation, which all are key export-oriented industries.

Most analysts surveyed by Vedomosti expect a near-zero or slightly negative growth path to persist in 2Q25, with Russia’s economy continuing to teeter on the edge of a technical recession, with near-zero or negative q/q growth expected through mid-year.

This contrasts with the recent bullish outlook published by EconMin.

As followed by bne IntelliNews, most recently the ministry surprisingly maintained a bullish 2.5% GDP growth forecast for 2025 despite falling oil prices and tight monetary policy.