Translated material
Investments have gone into crisis: the decline in the first quarter cannot be considered a correction or pause
Investments in fixed assets fell by almost 15% in the first quarter. Russian authorities are trying to downplay the scale of the event and talk about a natural correction after the investment boom of 2022–2024. However, such indicators of investment compression have been observed only twice over the past 30 years: in 1998 after the default and in 2009 against the backdrop of the crisis, which resulted in a reduction in Russian GDP by almost 8%.
However, the Minister of Economic Development admitted that the figures for the reduction in investment “do not fit” with the data on the decline in GDP in the first quarter (only -0.2%), but expressed hope that the situation will “even out.” Meanwhile, surveys of enterprises conducted by the Central Bank also indicate a sharp decline in investment activity at the beginning of 2026. The corresponding index decreased from 3.1 to -4.8 points. And a similar decline was also observed previously only in crisis episodes - in 2015, 2020 and 2022 - against the backdrop of a 3-5% decline in GDP.
The recorded reduction in investment, not only in quantitative but also in qualitative terms, cannot be considered a correction after the boom. The growth of investment in 2022–2024, firstly, was on a smaller scale than is commonly believed, and secondly, it was by no means frontal. The investments were partly aimed at replacing the lost capacity as a result of sanctions and the restructuring of logistics, and partly at deforming the structure of the economy to suit wartime needs. At the same time, a number of civil sectors remained, on the contrary, underinvested.
The Russian authorities are actually quite concerned about the investment failure, as evidenced by the special meeting with Putin. However, they are unlikely to be able to change the situation. The sharp decline in investment was the result of a triple whammy: weakening fiscal impulse, high interest rates and the deteriorating financial position of enterprises whose own funds play a key role in investment. And even the continued reduction of the key rate will not compensate for the negative impact of two other factors.
The investment surge of 2022–2024 was artificial, and it is very likely that investment dynamics will now return to the long-term trajectory of sluggish growth that was observed during the 12 pre-war years. And this is not the worst scenario yet - taking into account sanctions, an increase in the tax burden, another redistribution of property and a deformed structure of the economy.
Correction or recession?
In the first quarter of 2026, investments in fixed assets in the Russian economy fell by 14.3%, according to Rosstat data published in early June . These figures look so sensational and scandalous that the Russian economic authorities were forced to make a whole bunch of psychotherapeutic comments. Deputy Chairman of the Central Bank Alexei Zabotkin said that these data “do not scare him” and referred to the high base - in the first quarter of 2025, investments grew by 6.5%. A similar line of defense is followed by the Ministry of Economic Development , where what is happening is called an “expected correction” after the “investment boom” of 2021–2024, when the cumulative increase in investment was 38%. In addition, the ministry added that the data for the first quarter is not indicative, since it usually accounts for only about 15% of annual investments.
The last argument seems helpless: annual indices exist to compare the dynamics and trends of comparable periods. The issue of the investment boom deserves a separate discussion, but a correction can be called a pause in growth or a slight decline, which, for example, was observed throughout 2025, when investment decreased by 2.3%. It is characteristic that not so long ago the Ministry of Economic Development, in its forecast for 2026, citing a “high base” and an investment boom, expected a “correction” in investments and estimated their likely decline within this framework by 0.5%. Chairman of the Russian Union of Industrialists and Entrepreneurs Alexander Shokhin already admitted in April that the correction could even amount to -1.5%. The figures for the first quarter, therefore, are a fundamentally new event that does not fit into the framework of these expectations. If investments in the first quarter amounted to 15% of the annual volume, then their reduction on the scale announced by Rosstat has already reached -2.3% of annual investments, even if in the next three quarters they will remain at the level of last year.
The panic of government comments is fully justified: a decline in investment of almost 15% in the comparable period indicates a crisis state of the economy, regardless of the base effect. Chart 1 clearly shows in the long series both episodes of “corrections” after a surge in investment (for example, in 2013 and 2019), and the fact that comparable quarterly reductions in investment have not been observed over the past 15 years. In 2015, due to the crisis caused by falling oil prices and intensified by Western sanctions, the maximum quarterly decline was 8.5% and was accompanied by a decline in GDP by 3–4%, and in the first half of the covid 2020, the decline reached 5% with the same decline in GDP in the second and third quarters. Over the past 30 years, comparable episodes of investment reduction were observed only in 1998 (default) and in 2009, when Russian GDP shrank by almost 8%. Crisis indicators of investment activity cannot but affect the volume of added value produced.
Chart 1. Dynamics of investment in fixed capital and GDP, 2011–2026
Actually, this logic is also recognized by the Russian economic authorities when they move from psychotherapy to economic analysis. Thus, speaking at the economic forum in St. Petersburg, Minister of Economy Maxim Reshetnikov admitted that the data on a reduction in investment by 14.3% and a reduction in GDP by only 0.2% in the first quarter “do not really fit together.” But he immediately expressed hope that in the second quarter “[we] will see some kind of synchronization” and the situation with investments “should smooth out.” Quarterly investments and GDP dynamics are indeed, as the minister noted, considered by different methods (the income method and the production method, respectively). However, the calculation results must converge, albeit with some error - such convergence is evidence of the reliability of statistical data. The minister was implying that there was an error or statistical artefact in the data and implied that he was on the side of counting investment rather than GDP.
Quarterly indicators of investment activity are indeed considered not very reliable. Rosstat first receives the reports of large companies and forms an assessment based on them, and then calculates the data for a full range of organizations. However, the discrepancy between the preliminary estimate and the final data has averaged about 1.5 percentage points in one direction or the other in recent years. Thus, even under a very favorable correction scenario, the fall in investment in the first quarter of 2026 will still be double-digit.
Table 1. Difference between preliminary and final estimates of investment dynamics, 2024–2025
At the same time, Reshetnikov’s assumption that the statistical deviation is on the side of calculating investments does not at all look obvious or even plausible. If, following the Minister, we recognize the inadequacy of official statistics and turn to another source - surveys of enterprises conducted by the Central Bank , then we will also find a sharp and clearly crisis-like drop in investment activity in the first quarter of 2026 (Graph 2). In 2025, the average value of the investment decisions index was 3.1 points, and at the beginning of 2026 it fell to -4.8. Similar index values were previously observed in the already familiar crisis episodes of 2015, 2020 and 2022, in which survey and statistical indicators of a decline in investment are in good agreement with each other.
At the same time, the decrease in investment activity in processing is somewhat less than in the three previous crisis episodes; But the real collapse in the mining sector is comparable in scale only to the deep crisis of 2009. The same features are demonstrated by industry indicators of the manufacturing sector: in the production of consumer goods, the index of investment plans fell to zero, and in investment goods it shows crisis values similar to those of 2015, 2020 and 2022 (Graph 3).
These data allow us to assert with considerable confidence that in the first quarter of 2026, the Russian economy is not experiencing a correction, but an acceleration in the decline in investment (in the third quarter of 2025 they decreased by 4.3%, in the fourth - by 5.3%), similar to previous crisis episodes. At the same time, unlike them, in the current episode, consumer demand is not yet captured by the crisis dynamics and is partially balanced by the failure of production and investment.
Charts 2–3. Investment plans of enterprises, 2006–2026, balance of estimates
Boom or bubble?
The argument of the Russian economic authorities that the decline in investment is an expected and natural turn against the backdrop of the investment boom of previous years also seems untenable. And the point is not only in the scale of the observed reduction, but also in the fact that the boom itself is largely a myth, as economic analysts have already pointed out more than once.
Firstly, as experts from the Center for Macroeconomic Analysis and Short-Term Forecasting (CMAFS) noted earlier and the authors of a recent report from the Institute for Integrated and Strategic Studies (ICSI) noted, the artifact of the investment boom is to some extent associated with underestimation of the real increase in prices for investment goods. Physical (deflated) investment volumes were apparently lower than statistics reflect. In addition, two-thirds of the total increase in investments in 2021–2025 was made up of investments in buildings and structures, while the volume of investments in this cluster does not match the growth in the volume of work in the “Construction” type of activity and with the dynamics of the production of building materials; at the same time, investments in machinery and equipment remained extremely moderate, as noted in the analytical note of the Center for International Relations. It is also significant that the introduction of fixed assets amounted to 11.8% over the past five years, which is three times lower than the growth rate of investment in fixed capital recorded by Rosstat, and such a gap has not been observed before, the ICSI report notes. Finally, a significant part of the investments of the last four years was forced and replacement, that is, they did not create new production capacities, but replaced retired old ones (→ Re: Russia: After the boom ). Including, it compensated for the outflow of capital associated with the withdrawal of funds from foreign investors (about $200 billion). Finally, a significant segment of the investments made was in the expansion of military production.
Therefore, the post-boom pause argument, which implies that the economy created excess capacity in the previous period in excess of current demand, appears to be untenable. Quite the opposite: investments in production aimed at non-state domestic demand were insufficient to cover its growth, which became one of the factors in accelerating inflation.
In terms of types of economic activity, we observe not so much an increase in investment as an intensive structural redistribution of funds. For example, in 2025, investments in the manufacturing sector of industry increased by 49% compared to the level of 2021, according to Rosstat . At the same time, in the production of food products the increase was 11%, in the production of motor vehicles - 5%, in the production of clothing investments decreased by 18%, in the production of coke and petroleum products - by 13%, in wood processing - by 38%, in the production of furniture - by 29%. But in the production of chemicals, the increase in investment volume was 215%, in the production of electrical equipment - 109%, in the production of finished metal products - 98%, in the production of other vehicles - 106%. This extraordinary increase in investment is primarily related to military production. In trade, investments increased by 2%, in education - by 6%, in the field of health and social services they decreased by 11%, in agriculture - by 7%. But in software development they grew by 213%, and in the section “Public Administration and Military Security” - by 45%.
Thus, we are not talking about an investment boom in the economic sense of the term, but about a process of structural transformation, or rather deformation, of the economy. At the same time, clearly excess investments were directed to sectors and industries with a low multiplier effect, that is, a chain stimulus for the economy as a whole (spillover effect), while sectors and industries with a high multiplier effect turned out to be underinvested.
Triple Strike
It is obvious, however, that the investment decline is in fact a serious concern for the Russian authorities. This is evidenced by the meeting held by Putin on June 10, dedicated specifically to this issue . At the same time, in public discourse, representatives of the ruling elite compete to camouflage this decline with various fancy terms. Thus, at the St. Petersburg Economic Forum , Putin spoke about “launching a new investment cycle” (from which we can conclude that the previous cycle has been exhausted). And at the “investment” meeting on June 10, he corrected the Chairman of the Russian Union of Industrialists and Entrepreneurs, Alexander Shokhin: we are not even talking about an “investment pause,” but about “investment restraint.” Deputy Prime Minister Alexander Novak also tried to downplay the severity of the problem: he presented the figures for the reduction in investment compared to the first quarter of 2025 in nominal terms (without taking into account inflation) so that they would not look so scary: the reduction in investment in this representation was only about 4%.
The proposals made at the meeting to correct the situation do not seem too serious, and sometimes even anecdotal. The first type includes proposals to expand the already existing preferential regimes for investors, deferred tax deductions that enterprises must receive five years after making investments, minor amendments to the Labor Code, as well as the notorious amendments to the statute of limitations for privatization transactions , which are discussed throughout the entire cycle of the Kremlin-initiated redistribution of property in 2024–2025 (a striking recent example is the expropriation of a holding company "Rusagro" from its creator Vadim Moshkovich). Finally, discussions about increasing “predictability of the business environment and confidence in serious investment opportunities” look downright ridiculous against the background of the aforementioned seizure of assets and the annual increase in tax rates, various fees and forced donations from business.
Perhaps the only meaningful signal was Putin’s expressed confidence that the Central Bank would continue the cycle of rate cuts (despite the fact that neither Elvira Nabiullina nor any of her deputies participated in the meeting). The rate undoubtedly has a significant impact on investment activity, although mainly in the sector of large companies. However, the main driver of investment activity in recent years has been the public sector, and it is the brewing crisis of public finances and the decline in investment impulse from the budget that are the most important factor in slowing it down.
In fact, the investment recession is the result of three factors: contraction of budget funding, a high key rate, which increases the price of investment resources, and the deterioration of the financial condition of enterprises. Their own funds are traditionally the main source of investment, providing almost two-thirds of all investments. Meanwhile, the balance of profits and losses of companies in January–March 2026, according to Rosstat calculations, amounted to only 74% of the level of the same period last year. Manufacturing profits fell 40% in the first quarter of 2026, while losses increased 10%. In general, for all types of economic activity, profits decreased by 19%.
As a result of this triple blow, the decline in investment occurs on a broad front and affects almost all areas of activity and industries. At the same time, the reduction in the budgetary impulse of investment activity partly reproduces the deformed structure of investments in 2022–2025. The growth of investments by the first quarter remains only in the types of activities “Public administration and ensuring military security” (+25%), as well as in finance and insurance (+8.7%). On the contrary, the maximum scale of investment reduction (-35–40%) is in healthcare, scientific and technical activities, education and trade. In the industrial sector, investments in manufacturing decreased the most - by 22%, while in production the reduction occurred in smaller volumes - by 12%, including in oil and gas production - by 10%. In processing, investments fell both in predominantly civilian sectors (for example, investments in metallurgical production decreased by 31%, in food production - by 11%), and in military and paramilitary industries: in the production of chemicals and products (-9%), "other" vehicles and equipment (this category includes UAVs; -33%), the production of computers, electronic and optical products (-36%) and the production of fabricated metal products (this includes heavy military equipment; -20%).
In the context of a reduction in budget expenditures, the Central Bank will indeed have the opportunity to continue the cycle of rate cuts, but the credit lever will not compensate the economy for the contraction of public investment and the deterioration in the financial condition of enterprises associated with both the cessation of growth and the increase in the tax burden. Over the past 30 years, investment dynamics have clearly distinguished three periods (Figure 4). The intense growth of the 2000s gave way to sluggish growth of the 2010s, and the acceleration of investment growth in the first half of the 2020s was a consequence of the accelerated use of budget funds and the National Welfare Fund. It seems highly likely that investment dynamics will revert to the long-term trend of sluggish growth in the coming years. And this does not seem to be the worst scenario yet - against the backdrop of sanctions, an increase in the tax burden, another redistribution of property and a deformed structure of the economy.