Russia has been manipulating economic data to project resilience against wartime pressures and Western sanctions, while potentially misleading even President Vladimir Putin about the true state of the economy, according to Sweden’s military intelligence chief.

Thomas Nilsson, head of Sweden’s Military Intelligence and Security Service, said Moscow was seeking to create the impression that its economy had absorbed the impact of the war in Ukraine and punitive measures imposed by western governments since 2022.

“Russia is deliberately falsifying data,” Nilsson said, adding that the effort was designed to deceive Ukraine’s allies and sustain confidence at home.

The assessment comes as Russia has repeatedly highlighted stronger-than-expected headline growth figures driven by wartime state spending, rearmament and energy revenues. The IMF this year forecast Russian GDP growth of more than 3% for 2024, outpacing several European economies, though economists have warned that much of the expansion reflects military production rather than sustainable private-sector activity.

The report comes on top of the latest Talking Trends bulletin from the Central Bank of Russia (CBR) that addresses some of these problems.

The CBR said the cooling was partly due to purchases being brought forward into late 2025 and to businesses and households adjusting to tax changes. Yet it added that February data suggested the early-year weakness in demand was “likely only temporary”, implying the slowdown may prove shallow rather than structural.

That leaves monetary policy in an awkward position. The bank said annual inflation in March was little changed at 5.9%, while underlying price dynamics remained elevated through February and March. The desired deceleration of current price growth to 4% annualised “has not happened so far”, according to the bulletin.

CBR governor Elvia Nabiullina is left in the awkward position of rocketing commodity prices due to the war in Iran that will weaken the ruble and bring inflation down, but at the same time will make imports more expensive and push inflation up. However, as official inflation has already halved from a sticky 10% last year thanks to her unorthodox experiment to slow growth and bring inflation down artificially the regulator has been able to put in 500bp of rate cuts in the last year to boost growth. But that easing cycle may be over after VAT was hiked by two percentage points in January to raise extra cash to cover the swelling budget deficit that will push inflation up again. The CBR is now watching closely to see how fast the windfall from high oil prices feeds through into the budget and how much relief it will bring. Much depends on how long the Strait of Hormuz stays closed. Some economists have calculated that oil prices will have to stay over $100 a barrel all year to make a material difference to Russia’s budget dynamics.

Russia’s government is banking on the much needed fiscal boost from the windfall of the war in Iran, according to Reuters citing sources familiar with the discussions, and the Ministry of Finance (MinFin) has already postponed a plan to cut spending by 10% this year in anticipation of higher oil and gas revenues. The International Monetary Fund (IMF) is also being optimistic, upgrading Russia’s growth forecast for this year to 1.1% in its latest World Economic Outlook on the back of expected higher oil prices.

Nilsson said higher crude prices during the recent Middle East conflict had failed to restore Russia’s broader economic health. To stabilise public finances, he said, Moscow would require Urals crude prices above $100 a barrel for a year or more. Currently, Urals is trading at $102 per barrel at the time of writing, down from a recent high of $122 in early April.

Russia’s benchmark Urals blend has generally traded at a discount to Brent since western sanctions and the G7 price cap were introduced. However, following the closure of the Strait, the price of Urals spiked to a $20 premium to Brent as one of the few major sources of oil that doesn’t pass through the Gulf. Moreover, the Russian blend is very similar to the Gulf grades making it easy for Chinese and Indian refineries to process.

Nilsson said the Kremlin had redirected large volumes of state funding towards unmanned systems and long-range weapons production. But beyond drone manufacturing, he said Russia’s military-industrial complex was constrained by “corruption, unprofitability, and reliance on state bank loans”.

Nevertheless, the Russian economy is under pressure and recorded a contraction in the first quarter of this year. Putin acknowledged a 1.8% decline in GDP in early 2023, but preliminary results suggest that the economy contracted again in the first quarter of this year in real terms.

The Bank of Russia has repeatedly warned of deteriorating external conditions, labour shortages and persistent inflationary risks. Nabiullina herself has repeatedly warned that the economy may go into recession this year. Several officials have said that Nabiullina’s plan to “cool” the economy to bring down inflation has gone too far too fast.

There has also been a lot of debate over the official inflation number; many economists believe that the official version is a vast understatement of the real number. Nilsson said official inflation data was understated, arguing price growth was “likely closer to 15% than the official 5.86%”.

Swedish and German intelligence services also believe Russia has understated its fiscal deficit by $30bn, raising concerns over hidden liabilities in the banking sector and the possibility of future financial stress. Other reports have suggested that commercial banks have been pushed into offering Russian defence contractors cheap soft loans as an indirect way to fund the military machine off the state’s books.

“Putin may not fully grasp the economic severity his country faces,” Nilsson said.

He added that Russia now faced a narrowing set of options: “Overall, Russia's economy faces either a prolonged recession or a shock scenario.”