Russia's industrial sector is accelerating its decline in early 2026

The pro-Kremlin Centre for Macroeconomic Analysis and Short-Term Forecasting has recorded stagnation in Russian industry at the start of 2026, despite official figures showing growth. This has been reported by the Ukrainian Foreign Intelligence Service.

According to Rosstat, industrial production rose by a total of 1.7% between December and February. However, the centre’s estimates show a different trend. Following a brief upturn in December, production fell by 0.6% in January and partially recovered in February. Overall, a decline of 0.3% was recorded over the three-month period. The centre notes that civilian sectors of Russian industry accelerated their decline at the start of 2026.

In February, production of construction materials fell by 1.4%, ferrous metallurgy by 1.1%, and mechanical engineering by 2.2%. The aggregate contribution of most sectors remains negative at minus 0.8%, particularly when accounting for oil refining and metallurgy.

According to S&P Global, the PMI index fell to 48.3 in March from 49.5 in February. This is the lowest reading in three months. Production has been contracting for the thirteenth consecutive month, whilst export demand has been falling for the fifth month. Purchasing activity is falling at its fastest rate in four years, as companies cut back on raw material purchases due to a decline in orders and rising fuel prices. Employment in the sector has also been falling for the fourth consecutive month.

The metallurgical industry, long considered one of the key sectors of the economy, is showing signs of crisis in 2025–2026. Profitability in the sector has fallen to 9.6%, which is below the cost of servicing loans. The joint-stock company Ural Steel has gone from a profit of 11 billion roubles to a net loss of over 22 billion roubles in the space of a year. The tax authorities have deferred debt collection until the end of April to prevent the company from shutting down and 9,000 workers from being made redundant.

The metallurgical company Severstal reported a fivefold drop in profit and a 42% reduction in EBITDA.

Small and medium-sized businesses are being affected by falling demand and a rising tax burden. Almost half of all businesses recorded a significant drop in profits in 2025. The number of businesses in the trade sector alone fell by 11,500. It is estimated that a further 250,000 to 300,000 enterprises could cease operations in 2026.

Wage arrears for the year increased 1.7-fold and amount to around 2 billion roubles. It is estimated that 99% of delays are due to a lack of funds among enterprises. As of the end of 2025, hundreds of thousands of workers are on forced leave.

State funding remains the main factor supporting production, but it does not ensure sustainable growth. By the end of 2025, Russia’s national debt had risen by 21% or 6.1 trillion roubles, reaching 35.1 trillion roubles. Domestic debt increased by 29.1% and stands at 30.7 trillion roubles.

The weakening of investment activity and domestic demand is contributing to a shift from stagnation to recession.