Russia’s domestic manufacturing sector again collapses to new lows
Russia’s wartime economy continues to collapse, with today’s data confirming a worsening situation in production across the country. Russia’s civilian industrial sector has officially entered recession, according to a new report from the Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF), underscoring the growing strain on the country’s economy amid prolonged military mobilization and tightening international isolation.
The CMASF data, covering the first quarter of 2025, shows that non-military industrial output declined by an average of 0.8% per month between January and March. March alone recorded a seasonally adjusted contraction of 1.1%. The downturn reverses a short-lived rally in late 2024, which was primarily driven by state stimulus measures and defense-related procurement.
Importantly, the report excludes sectors dominated by military production—areas that have experienced artificial expansion due to increased government spending tied to the ongoing war effort. Adjusted for this factor, the figures present a clearer view of underlying weakness across Russia’s civilian economy.
Economists cited several structural factors behind the contraction: persistently high inflation, weakening consumer demand, significant capital outflows, ruble depreciation, and growing logistical disruptions resulting from sanctions and trade restrictions. Unseasonably warm weather in January and March was noted as a minor influence but not a primary driver of the declines.
Other economic indicators continue to point to systemic stress. Inflation remains elevated despite multiple rounds of rate hikes by the Central Bank of Russia. Consumer confidence indexes have fallen steadily, retail sales are declining, and bankruptcies among medium-sized enterprises have accelerated over the past quarter.
“The Russian economy is increasingly dependent on defense production,” said one Moscow-based economist, speaking anonymously due to potential political repercussions. “The civilian sector, which is critical for sustainable, long-term growth, is showing clear signs of structural degradation.”
Official government communications have largely avoided addressing the civilian sector’s downturn, focusing instead on highlighting record defense production figures. However, analysts warn that this trajectory is unsustainable. Without a robust civilian economy to underpin broader fiscal and industrial health, Russia’s capacity to maintain its current level of military spending may face serious challenges over time.
The first-quarter figures offer a sobering snapshot of an economy in transition: from a mixed model to one increasingly centered on wartime mobilization, at the expense of private sector vitality. As international isolation deepens and internal pressures mount, the likelihood of a broader and more prolonged economic contraction appears to be rising.