russia’s Industry Downturn Is Accelerating: Civilian Industries Are Stagnating, Small Businesses Are Dying out, Debt Is Hitting Record Highs

The pro-kremlin center for macroeconomic analysis and short-term forecasting (CMASF) reports stagnation in russian industry in early 2026, despite traditionally optimistic official statistics.

According to rosstat, industrial production grew by a total of 1.7% in December–February. CMASF estimates paint a different picture: after a brief uptick in December, production fell by 0.6% in January and partially recovered in February. Overall, a 0.3% decline was recorded over the three months. “The downturn of civil sectors of russian industry accelerated in early 2026,” says the analytical center close to the kremlin.

The sectoral picture is even bleaker. In February, production of construction materials fell by 1.4%, ferrous metallurgy – by 1.1%, and machine building – by 2.2%. The aggregate contribution of most sectors to the trend remains negative: minus 0.8%, including oil refining and metallurgy.

S&P Global’s March PMI index fell to 48.3 from 49.5 in February – the lowest reading in three months (a reading of 50 separates growth from contraction). Production has been contracting for the 13th consecutive month, while export demand has been falling for the fifth month in a row. Purchasing activity has plummeted at the fastest rate in four years: companies are cutting back on raw material purchases due to declining orders and rising fuel prices. Employment in the sector has been falling for the fourth consecutive month.

russia’s steel industry, long considered the flagship of the country’s economy and a stable source of foreign exchange earnings, plunged into a systemic crisis in 2025–2026. Profitability across the entire industry fell to 9.6%, which is below the cost of servicing loans. The “ural steel” JSC – the city-defining enterprise of novotroitsk, the market leader in bridge steel, and the most important contractor for state defense orders – went from a profit of 11 billion rubles to a net loss of over 22 billion rubles in a single year. The tax service was forced to manually defer debt collection on court-ordered claims until the end of April to prevent the company from closing and laying off 9,000 employees. Meanwhile, the metallurgical giant “severstal” has recorded a fivefold drop in profit and a 42% reduction in EBITDA.

Small and medium-sized businesses have been hit by a double blow – a drop in demand and a rising tax burden. Nearly half of businesses in 2025 saw a collapse in profits. The number of entities in the retail sector alone fell by 11,500. In 2026, an estimated 250,000–300,000 more businesses could disappear.

At the same time, wage arrears in the rf have increased 1.7-fold over the past year and now total approximately 2 billion rubles. According to experts, 99% of payment delays are due to companies’ lack of funds. As of the end of 2025, hundreds of thousands of workers have already been forced into furloughs.

State funding remains the sole pillar of production, but even that does not ensure sustainable growth. By the end of 2025, russia’s national debt had increased by 21%, or by 6.1 trillion rubles, having reached 35.1 trillion rubles. Domestic debt rose by 29.1% to 30.7 trillion rubles. Weakening of the investment activity and domestic demand is speeding up the transition from stagnation to a full-blown recession.