Commentary
on the Bank
of Russia’s Medium-term
Forecast

Key rate. The range of the average key rate for 2026 has been narrowed to 14.0–14.5% and revised upwards to 8.0–10.0% for 2027 (compared to 13.5–14.5% and 8.0–9.0% in the February forecast, respectively). Growth in uncertainty and inflation risks stemming from external conditions and fiscal policy parameters implies a more cautious key rate cut path than envisaged in February. In 2028, as before, the key rate is predicted to return to its neutral range of 7.5–8.5% per annum.

Inflation. Inflation forecast remains unchanged. At the end of 2026 Q1, inflation was 5.9% compared to 6.3% in the February forecast. This was due to weaker domestic demand and lower growth rates of prices for several volatile components than predicted in the February forecast. The monetary policy stance will help return underlying inflation to 4% in 2026 H2. Annual inflation will drop to 4.5–5.5% in 2026 and return to the 4% target in 2027.

GDP. In 2026 Q1, GDP was estimated at −0.5% YoY which was below the Bank of Russia’s previous forecast. This is in part related to the calendar factor (in January–February 2026, there were three fewer business days than in January–February 2025, Chart 21), the impact of which was estimated as being slightly smaller in the February forecast, and unfavourable weather conditions that affected certain sectors, including construction. In 2026 Q2, economic activity is expected to recover amid the reverse effect of the calendar factor (in 2026 Q2, there are three more business days than in 2025 Q2, Chart 21). High-frequency data also suggest a revival in economic activity in March–April 2026, with current business climate estimates for April approaching the levels of 2025 Q3–Q4.

Given the above, the overall economic growth forecast remains unchanged. In 2026, as before, GDP is predicted to grow at a moderate rate of 0.5–1.5%. Further on, GDP growth will be consistent with the long-term growth rates of the potential output of 1.5–2.5%.

• Final consumption expenditure. The forecast remains unchanged and continues to imply a more moderate pace of consumption growth in 2026 (from 0.5% to 1.5%), including due to a partial shift of consumer demand to 2025 H2 because of the increase in the VAT base rate from 20% to 22% and changes in the recycling fee parameters. In 2027–2028, final consumption expenditure is expected to gradually return to sustainable growth rates of 1.5–2.5%.
• Gross capital formation. The forecast range of gross capital formation remains unchanged at 1.0–3.0%. In 2025, gross capital formation was down by 4.9% which was below Rosstat’s preliminary estimate (-3.0% YoY), due to a lower growth rate of investment. Further on, we expect a recovery in investment activity and a positive contribution from inventory changes to GDP.
• Gross fixed capital formation. According to the revised Rosstat’s estimate, gross fixed capital formation (GFCF) growth rates in 2025 were reduced from 1.7% to −0.4% YoY and now align better with the dynamics of fixed capital investment. The Bank of Russia’s forecast assumes a slight recovery in investment activity in 2026 compared with the previous year amid an easing of monetary policy; therefore, the forecast range for GFCF has been maintained at 0.0–2.0%. Further on, investment demand is projected to expand sustainably at a rate of 1.0–3.0% per annum, due in part to the infrastructure projects.
• Net exports. The export and import forecast remains unchanged. In 2026, the growth of export quantities is still expected to be within the range of 0.5–2.5%. The forecast growth of import quantities also remains within the range of 0.5–2.5%. In 2027–2028, both exports and imports will grow at comparable rates of 1.0–3.0%.

Monetary indicators. In 2026, the forecast ranges of growth in claims on the economy, organisations, and households have been narrowed to 6–10%, 7–11%, and 5–9%, respectively (compared with 6–11%, 7–12%, and 5–10% in the February forecast), due in part to weaker-than-expected credit activity in 2026 Q1. Retail lending is predicted to continue recovering after the weak dynamics of 2025, while corporate lending will grow at a moderate pace. Given the more active budget execution in 2026 Q1, the forecast range for money supply growth in 2026 remains unchanged. The forecast for 2027–2028 for all monetary indicators remains the same as in February. They are expected to grow at sustainable rates consistent with the economy’s balanced growth path.

Oil prices. The oil price for tax purposes is raised to $65 and $55 per barrel for 2026 and 2027, respectively, taking into account current trends in the global commodity market. Prices were temporarily pushed up by a supply shock caused by the conflict in the Middle East and the closure of the Strait of Hormuz. As the situation normalises, oil prices are expected to resume declining. In 2028, the oil price for tax purposes is expected to equal $55 per barrel, as was assumed in the February forecast.

Balance of payments. The current account surplus has been revised upwards to $72 billion and $44 billion for 2026 and 2027, respectively, due to a more substantial increase of the value of exports compared to imports. The export value has been revised upwards amid higher prices for energy and other commodities. The import value in dollar terms has been raised due to a more notable rise in import prices in 2026 amid worsening logistics caused by the conflict in the Middle East. In 2028, the current account surplus is expected to come in at $29 billion, i.e. close to the previous forecast. The upward revision of energy prices assumes an increase in reserves by $5 billion in 2026 and a less significant reduction in the following years (by $5 billion in 2027 and $3 billion in 2028), due to changes in the volume of transactions with the National Wealth Fund’s resources.