Russian industrial managers are reporting what they describe as the steepest deterioration in factory demand since the late 1990s, as higher borrowing costs, tighter sanctions and a slowing economy weigh on civilian production.
A year-end survey by the Institute of Economic Forecasting of the Russian Academy of Sciences (INP RAS), cited by Kommersant, found that senior managers at large industrial companies rated sales conditions in 2025 as the weakest since 1998. The same survey suggested that assessments of demand fell below the lows recorded in 2009, during the global financial crisis, and 2015, when Russia faced its first wave of sanctions after the annexation of Crimea.
The INP RAS researchers said that industry had “with understanding” endured the initial phase of what they called an engineered cooling of the economy, but that “in 2025 its patience ran out”. Kommersant reported that production plans across industry dropped to a 16-year low, close to the nadir seen in 2009, while the institute’s overall “industrial optimism” index fell to its worst level since that crisis year.
Official statistics published in late December added to the picture of weakening momentum. Interfax, citing Rosstat, reported that Russia’s industrial output fell by 0.7 per cent year on year in November 2025, after growth in preceding months. Manufacturing output declined by 1.0 per cent year on year, while the extractive sector rose by 0.7 per cent.
Reporting on the same Rosstat data, The Moscow Times said November marked broad-based weakness in several major civilian branches, including a 4.1 per cent fall in metallurgy, a 1.7 per cent decline in chemicals and a 5.4 per cent drop in machinery-building. It also said food production fell by 0.8 per cent, describing this as the first contraction in that category in 15 years.
Some of the sharpest drops were concentrated in equipment and transport-related manufacturing. The Moscow Times cited figures showing output of tractors down 61.6 per cent, bulldozers down 53.7 per cent, lifts down 37.2 per cent and passenger rail carriages down by half. It also reported that car production fell by 34.1 per cent, returning to levels associated with the worst months of 2022.
At the same time, the Rosstat-linked breakdown quoted by Kommersant showed pockets of expansion, including “other transport and equipment”, pharmaceuticals and some metal products, alongside computers, electronics and optics. The distribution of gains and losses has fed an argument among analysts that wartime demand is reshaping industrial structure rather than lifting the civilian economy evenly.
Financial conditions remain a key constraint for investment and working capital. On 19 December 2025 the Bank of Russia cut its key rate by 50 basis points to 16.0 per cent, but signalled that monetary policy would remain tight as inflation expectations edged higher. The official rate series shows the key rate at 16.0 per cent through 26 December.
Business reporting has increasingly focused on debt servicing costs and refinancing risks. In a Reuters report dated 26 December, VTB said corporate debt restructuring was under way and linked the trend to the cost of servicing loans after a prolonged period of restrictive monetary policy. Reuters also quoted expectations of slower national growth, consistent with a wider narrative of “cooling” after rapid expansion earlier in the war period.
Independent assessments differ on how quickly industrial strain could become systemic, but several emphasise structural trade-offs. The Jamestown Foundation has argued that Russia is experiencing “reverse industrialisation”, in which higher-technology segments give way to more labour-intensive, lower-productivity activity, while defence-related production receives priority and civilian sectors stagnate.
Alexandra Prokopenko, a former central bank adviser, told The Washington Post that the economy appeared “frozen” and “unsustainable”, comparing it to “a car idling in neutral with the engine overheating”, where damage accumulates even without visible movement. The same report described shrinking reserves, pressure from sanctions and growing concern among economists about credit quality after rapid corporate lending growth.
