Russian economic activity slows at start of 2026, economy approaching balanced growth path - Central Bank

MOSCOW. March 20 (Interfax) - The upward deviation of the Russian economy from a balanced growth path is decreasing, growth in economic activity slowed in early 2026 and consumer demand cooled on the back of the VAT hike, the Central Bank of Russia said in a statement following its decision to lower the key rate 50 basis points to 15.5% per annum.

"The economy is approaching a balanced growth path," the regulator said.

"The upward deviation of the Russian economy from a balanced growth path is decreasing. High-frequency data and business surveys indicate slower growth in economic activity in early 2026," it said.

"Consumer demand cooled after its sharp rise in late 2025, which was mainly driven by expectations of higher VAT and recycling fee. Business sentiment also implies more moderate domestic demand," it said.

Labor market tightness is gradually decreasing. "According to surveys, the percentage of enterprises experiencing labor shortages continues to shrink and is now at its lowest level since mid-2023. Companies are planning more moderate wage indexations in 2026 compared to 2023-2025. Meanwhile, unemployment remains at historical lows, and wage growth is still outpacing the growth in labor productivity," the Central Bank said.