Russia’s economy shrank by 0.2% year-on-year in the first quarter of 2026, its first annual decline in three years, following a 1% expansion in the previous quarter. The release came just days after the government cut its full-year GDP growth forecast to 0.4% from 1.3%. The downturn occurred despite a sharp increase in the prices of key Russian exports—oil, natural gas, coal, industrial metals, and grains—driven by disruptions to Middle Eastern shipping routes caused by the war. Economic activity weakened even as the Duma increased deficit spending in an effort to support an economy still constrained by Western sanctions, which continue to isolate Russian producers and financial institutions from global markets. Over the 12 months through April, Russia’s energy revenues fell by 40% year-on-year, while policy rates set by the Bank of Russia are expected to remain high.