Russian Central Bank Cuts 2026 Growth Forecast, Raises Inflation Outlook

Russia's central bank has sharply downgraded its economic growth forecast for 2026 while raising its inflation outlook, citing persistent price pressures driven by higher fuel costs and supply-side disruptions linked to attacks on the country's energy infrastructure.

The Bank of Russia now expects the economy to expand by 0% to 1% in 2026, down from its previous forecast of 0.5% to 1.5%. At the same time, it raised its inflation projection to 6%–7%, compared with an earlier estimate of 4.5%–5.5%.

Central Bank Governor Elvira Nabiullina said the latest acceleration in inflation reflects what policymakers describe as "supply-side shocks," noting that the sharp increase in fuel prices has already filtered through to a broad range of goods and services, prompting the bank to revise its inflation outlook.

In a statement, the central bank said inflation expectations among households, businesses, and financial market participants have continued to rise, warning that persistently elevated expectations could delay a sustained slowdown in price growth.

Fuel prices have accelerated since mid-May as several Russian regions experienced supply shortages during June following Ukrainian strikes on oil refineries. The attacks, which Kyiv says are in response to Russia's invasion of Ukraine, have disrupted refining operations and tightened fuel supplies across parts of the country.

Analysts also warned that inflation could exceed the central bank's current forecast if Ukrainian long-range attacks on Russian logistics and energy infrastructure continue in the coming months.

Alongside its revised annual forecast, the Bank of Russia lowered its projection for fourth-quarter GDP growth to 0%–1.5% year-on-year, compared with a previous estimate of 1%–2%.

Nabiullina said high-frequency economic indicators suggest companies are anticipating weaker demand, and that a temporary decline in the economy's productive capacity also contributed to the decision to lower growth expectations.

The central bank said it expects fuel production capacity to recover gradually by the end of the year but cautioned that continued long-range Ukrainian strikes on energy facilities remain a significant risk to the sector.

On Saturday, Ukrainian drones reportedly struck an oil refinery in the Tyumen region, a logistics facility in Yekaterinburg, and a fuel and lubricants storage depot in Rostov-on-Don, marking the latest wave of attacks targeting Russia's energy infrastructure as the conflict continues.