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Russia is preparing to reduce state support for farmers due to the federal budget deficit. According to Forbes, the Ministry of Agriculture has proposed reducing the subsidy rate for preferential loans for agricultural producers from 70% to 50% of the Central Bank's key rate. The explanatory note to the draft order cites "the lack of additional funding sources and a shortage of federal budget funds."

Preferential loans with 70% interest rate compensation are currently available for a number of priority areas, including seasonal field work, smallholdings, breeding and genetics, dairy farming, the purchase of domestic equipment, and greenhouse complexes for the Far East, Siberia, and the Kaliningrad region. With the current key rate of 14.5%, such a loan can be obtained at approximately 4.35%, and after the subsidy reduction, the rate will increase to 7.25%.

The Ministry of Agriculture explains the decision by lowering the key interest rate, which stood at 21% a year ago. The previous conditions will remain in place for enterprises in border areas whose operations were disrupted by military action, as well as for investment projects producing critically important drugs and additives.

Last year, state support for the agricultural sector remained significant. According to Valeria Popova, Senior Analyst at Rikom-Trust, instead of the planned 100 billion rubles in subsidies for preferential loans, farmers received approximately 250 billion, increasing the volume of preferential short-term loans to a record 732 billion rubles, a 15% increase from 2024. This year, the total volume of subsidized short-term loans will decrease by almost 40%, to 150.1 billion rubles.

This reduction in support comes amid the industry's high debt burden, notes Vasily Kutyin, Director of Analytics at Ingo Bank. "For many farmers, subsidized lending isn't a development tool, but a basic mechanism for supporting operational activities: financing sowing, purchasing seeds, fuel, fertilizers, and feed. The sector won't be able to completely abandon loans," the expert explains. "Borrowed funds fully cover production needs," explains Irina Bachurina, CEO of the Mokroe agricultural company in the Lipetsk region. Korbut confirms the high demand for loans: many farmers don't even have their own working capital for sowing.

According to Kutyin, at the current Central Bank interest rate, reducing subsidies means an increase in the actual cost of borrowing by approximately 2.9 percentage points. The changes will hit capital-intensive sectors with long payback periods the hardest: dairy farming, greenhouse projects, processing, construction of new complexes, and farm modernization. "We shouldn't expect any new support measures," says independent agricultural market expert Alexander Korbut.

This could be particularly painful for the industry amid deteriorating financial performance. According to Nadezhda Kanygina, an analyst at the Institute for Comprehensive Strategic Studies, pre-tax profits in agriculture fell by 25.7% in 2025, while those in crop production fell almost twofold, to 43.7%. Entire segments of the agro-industrial complex have become unprofitable, including greenhouse vegetable growing, sheep and goat breeding, and the production of vegetable and animal oils and fats.

The share of profitable companies continues to decline. According to Korbut, in January-February 2026, it fell to 72.7% from 80.8% the year before. In crop production, the number of profitable companies fell from 75.8% to 64.6%, and in livestock farming, from 85.5% to 78.3%. "The share of unprofitable companies raising pigs for meat fell to a historic low of 49.59% in January-February 2026, meaning every second enterprise was unprofitable... Everyone is hoping for at least some improvement in the market situation," he says.

Against this backdrop, the number of people wanting to start new businesses in the agricultural sector is already lower than the number of those shutting down. Last year, 1,468 new companies were registered in crop production, while 1,738 were liquidated. In livestock farming, 261 enterprises left the market, 147 in food production, and 874 companies in livestock farming, hunting, and related services closed.

source: The Moscow Times https://archive.is/iq23y

The rapid slowdown in inflation recorded by official statistics hasn't affected how people perceive it. Estimates of price increases over the past year have risen from 14.6% to 15% in a month, while expectations for the coming year have grown from 12.9% to 13%, according to a survey conducted by the Public Opinion Foundation and commissioned by the Central Bank.

According to Rosstat, inflation in April was only 0.14%—the lowest for that month on record, with some weeks even reaching zero. In the first 12 days of May, when the survey was conducted, prices rose by 0.06%, and the ruble strengthened. "Absolutely damned inflation expectations. Maybe someone jinxed it," jokes Alexander Isakov, chief economist at Sberbank.

The increase in observed inflation was driven by lower-income Russians. Price increases hit them harder, so among those without savings, both observed and expected inflation is always higher than among those with savings. In the non-savings group, price growth estimates over the past year increased from 15.8% to 16.4%, the highest since September 2025, while among wealthier respondents with savings, they decreased from 13.4% to 13%. According to Rosstat, annual inflation in April was 5.6%. Inflation expectations, on the other hand, decreased slightly among those without savings (from 14.3% to 14.1%), but increased among those with savings (from 11.4% to 11.8%).

As a result, both estimates and expectations returned to their levels from a year ago. Economist Yegor Susin calls the current observed inflation figures effectively the annual average.

Other surveys yield similar results. VTsIOM measures inflation estimates and expectations over a one- to two-month horizon, rather than a year. Its inflation perception and expectations indices have remained virtually unchanged over the past six months. In April, more than half of its respondents called inflation "very high," while 30% described it as "moderate." In the next one to two months, 51% expect "minor" price increases, while 35% expect "significant" ones.

"The population has not yet felt a slowdown in inflation," Promsvyazbank analysts note. The perception of inflation is stable, as it contrasts with statistical data and the strengthening of the ruble (it gained 4% in the past month), they lament.

This perception is linked, among other things, to how people assess their financial situation. These assessments, as well as those of the state of the economy and its prospects, have deteriorated significantly this year. Half of Russians cited low income as their main problem, according to a March Levada Center survey, while February monitoring by the Institute of Psychology of the Russian Academy of Sciences (RAS) recorded an increase in financial anxiety and psychological distress across all socioeconomic groups. Joint surveys by the RAS Institute of Psychology and the Russian Public Opinion Research Center (VTsIOM) also found "an increase in the intensity of fears associated with rising prices," with 84% reporting this.

According to Gazprombank analysts, the slight decline in inflation expectations among people without savings is due to a decrease or slowdown in price growth for key commodities: tomatoes (-22% month-on-month), eggs (-3.3%), smartphones (-0.3%), bread (+0.2% after 0.7% in March), gasoline (0.5% after 0.9%), and clothing (0.2% after 0.7%). However, although inflation is slowing faster than the Central Bank's forecast, prices for almost half of the items studied on a weekly basis are rising "quite dynamically," Promsvyazbank analysts wrote.

source: The Moscow Times https://archive.is/LIRMg

First Deputy Prime Minister Denis Manturov stated that Chinese automakers should not create direct competition for AvtoVAZ. "Our condition was that Chinese cars should not directly compete with AvtoVAZ," Manturov emphasized. According to him, Chinese companies are prepared to offer Russian buyers primarily electric vehicles and hybrids, that is, models in segments that do not directly overlap with AvtoVAZ's product lineup. At the same time, the government requires the highest level of localization from foreign manufacturers.

Manturov's statement comes amid AvtoVAZ's own problems with demand. On May 14, the company resumed operations after a nearly two-week corporate holiday. Officially, the holiday was explained by the modernization of production lines for the release of the new Lada Azimut crossover in the third quarter and work on the Niva line. However, dealers attributed the assembly line shutdown primarily to warehouse overstocking due to weak sales.

According to Avtostat, Lada's performance in March was the worst, with first-quarter sales down 17.4%. The start of this year was the worst for the Russian auto market in the last 20 years, stated Dmitry Kostromin, AvtoVAZ's Director of Sales and Marketing. "We made forecasts for how 2026 would begin. Unfortunately, it started even worse than we predicted. In my opinion, these are probably the worst January-February months in the last 20 years of statistics. If we slightly adjust the market calculation methodology and only consider new cars that are actually sold and registered, the actual market is even worse," Kostromin said.

By the end of 2025, 685,200 Chinese cars were sold on the Russian market. The top three most popular brands were Haval (173,300 vehicles), Chery (99,800), and Geely (94,000). During the same period, 329,900 Lada vehicles were sold in Russia. AvtoVAZ CEO Maxim Sokolov complained about dumping by Chinese automakers in Russia, which "has gone beyond all bounds."

source: The Moscow Times https://archive.is/MkjUY

Russian base stations, which provide wireless communication between a phone and the mobile network, transmit data 25% slower than their foreign counterparts and are 70% more expensive. This was announced by Beeline CEO Sergey Anokhin at a digital industry conference in Nizhny Novgorod, according to The Bell and Frank Media. He stated that the company is testing base stations from two domestic manufacturers, Yadro and Irtey. "Basically, every year there's talk that, yes, they're lagging behind, and it's not yet possible to install them in cities with over a million people," Anokhin noted.

His presentation indicated that the stations' minimum acceptable performance level was only reached in April 2026. This required multiple software rewrites. However, in their current form, the towers don't support all the required bands; in particular, the software for basic LTE functionality still needs further development. In addition to low data transfer rates, the stations provide 30% fewer successful connections and consume 1.5-2.5 times more power than existing market solutions. "The current implementation is primarily suitable for lightly loaded locations," the presentation noted. It also stated that reaching target station quality requirements is not expected until 2030.

Following the outbreak of full-scale war in Ukraine, Russian authorities required mobile operators to use only domestic equipment for future network deployments. However, due to a lack of development and mass production, the transition to Russian solutions was postponed until 2028. Operators were allowed to build networks using foreign equipment, but were required to enter into forward contracts worth over 100 billion rubles with Russian base station manufacturers. By 2030, these companies are required to supply operators with approximately 75,000 devices.

Previously, the head of the Ministry of Digital Development, Maksut Shadayev, said that telecom operators had resigned themselves to the need to purchase domestic base stations. "We went through the denial, when operators said, 'It's not our problem.' Then there was anger, when we said, 'Guys, you can't get away with it.' Now we see that the bargaining has already begun. [...] Everyone has resigned themselves to it and are asking the right questions: how many manufacturers, who will they be affiliated with, how much will it cost, how effective will it all be," Shadayev noted.

source: The Moscow Times https://archive.is/sc1Dr

Russia needs a "swift end" to the war in Ukraine, as the country's economy cannot withstand a prolonged continuation of the SVO, stated State Duma Deputy Renat Suleimanov from the Communist Party of the Russian Federation. "Officially, 40% of the federal budget is devoted to defense and security. What development, investment, or capital investment can we talk about? Neither tanks nor shells have consumer value: the economy produces them, but they cannot be consumed by the population. They are pure expenses," Suleimanov said in an interview with the publication Continent Siberia.

According to him, large expenditures on the defense industry provide jobs, but at the same time lead to increased inflation and a reduction in social and investment budget spending. The deputy also emphasized that even after the end of the war, "colossal expenditures" will be required to restore the occupied territories, as well as support and reintegrate those returning from the front. "The special operation has already lasted longer than the Great Patriotic War. God willing, it will end in victory, not just an interim result," Suleimanov concluded.

According to the Russian federal budget for 2026, military spending will amount to 12.93 trillion rubles, and including security and law enforcement spending, it will reach 16.84 trillion rubles. Thus, the security forces will receive 38% of the budget, compared to 24% in the pre-war 2021. Meanwhile, the share of social spending in the treasury, on the contrary, will decrease from 38.1% in 2021 to 25.1% this year.

In January-April, the budget deficit reached 5.88 trillion rubles, or 2.5% of GDP, which is almost 3 trillion rubles higher than last year. The annual plan envisages a deficit of 3.79 trillion rubles, or 1.6% of GDP. Meanwhile, the Russian economy began to contract in the first quarter for the first time since 2023: GDP decreased by 0.2% year-on-year, while the decline in non-resource industries reached 0.7%.

In May, the government lowered its economic growth forecast for the current year to 0.4%. This is three times lower than the authorities initially expected, 2.5 times lower than the 2025 rate, and 10 times slower than the economic growth rate in 2023-2024. In the Ministry of Economic Development's "conservative" scenario, which is based on oil prices returning to $50 per barrel, the economy will end the year with a 0.5% contraction—the first since 2022.

source: The Moscow Times https://archive.is/aa3ni

To address the labor shortage in the economy, conditions must be created for pensioners and pre-retirement people to enter the labor market, Russian Minister of Economic Development Maxim Reshetnikov said in an interview with RBC.

This can be achieved, among other things, through retraining and professional development, internships, and the development of flexible employment, such as part-time or remote work, Reshetnikov listed.

In addition to the elderly, it is necessary to engage young people in the labor market, and also to increase the "flexibility of the labor market," the minister stated. "The State Duma adopted amendments to the Labor Code, which expand the scope for overtime work from 120 to 240 hours per year," Reshetnikov cited as an example.

The ongoing labor shortage, which Central Bank Governor Elvira Nabiullina called unprecedented in the country's modern history, is evidenced by the historically low unemployment rate (2.2%) and rising wages, according to Reshetnikov. "Under current conditions, a slight increase in unemployment could even facilitate both structural adjustment and the migration of labor to more productive jobs," the minister said.

According to FinExpertiza's estimates, the economy's current labor pool—that is, people who are employed but could potentially work—is 4.4 million people. Compared to 2021, it has shrunk by 40%, or 2.6 million people, after hundreds of thousands of Russians emigrated in the first years of the invasion, and another 1.5 million were recruited for the front.

In addition to the 300,000 mobilized in the fall of 2022, half a million Russians signed contracts with the Ministry of Defense in 2023, 450,000 in 2024, and 422,700 in 2025, according to official data.

According to estimates by the Russian Union of Industrialists and Entrepreneurs (RSPP), the labor shortage in industry alone reaches 2 million people. Moscow's Mayor Sergei Sobyanin previously complained that the labor shortage is 400,000-500,000. The Ministry of Internal Affairs is short 170,000 workers, and the agricultural sector is short over 130,000.

According to the Social Fund, there are 40.3 million pensioners in Russia, or approximately 28% of the population. Of these, approximately 7 million are working pensioners.

Demographics also influence the situation: the small generations of the 1990s and early 2000s are leading to a decline in the number of young workers, while the share of older workers is increasing, says Natalia Milchakova, leading analyst at Freedom Finance Global. Another factor is the high demand for workers from military factories, which have effectively "taken over" available resources, says Anastasia Gorelkina, Chair of the Board of Directors of JSC Holding Company Siberian Business Union.

source: The Moscow Times https://archive.is/JIeXU

Russian consumers are increasingly saving on clothing and footwear purchases, cutting back on trips and shopping, and postponing spending until better times.

By the end of 2025, the share of consumer spending on clothing and footwear fell to 7%—the lowest level in at least the last 11 years, according to statistics from Fashion Consulting Group, published by Kommersant.

According to FCG, last year, clothing sales in physical terms fell by 8-10% year-on-year, while the entire increase in monetary terms—6%, to 3.94 trillion rubles—was due to inflation. Compared to 2014 levels, the share of Russians' spending on wardrobe updates has fallen by more than a third: back then, clothing and footwear accounted for 10% of their expenses.

The reason is consumers' desire to cut back, FCG explains. Last year was the most difficult for the retail market in a long time, and negative trends will continue into 2026, notes Mikhail Burmistrov, CEO of Infoline.

Sales at the largest non-food chains selling durable goods fell by 7% in monetary terms and by more than 10% in physical volume, Burmistrov cites statistics. Pavel Lyulin, Vice President of the Union of Shopping Centers (STC), reports that in March, spending on clothing, footwear, and accessories fell by 4.5% year-on-year, on construction and renovation goods by 9.8%, and on furniture and interior design by 12.1%.

Consumer activity in Russia is declining as real income growth slows due to higher taxes and mandatory payments, as well as the rate of wage indexation, which is being impacted by the overall economic slowdown, according to Raiffeisenbank analysts. Furthermore, the Central Bank maintains a strict policy, meaning high interest rates on consumer loans, the bank notes.

By 2026, up to 40% of clothing retailers in the country could close, retail market participants previously told Shopper's. They cite falling demand, rising rent costs, new taxes, and competition from online marketplaces as pressure on the market.

Last year, one of Russia's largest clothing and footwear retailers, O'STIN, already closed 62 stores and laid off 15% of its staff. Gloria Jeans planned to close 150 stores this year. Finn Flare decided to retain stores only in Moscow and St. Petersburg. Concept Group (brands Concept Club, Acoola, and Infinity Lingerie) liquidated half of its stores. Among foreign retailers, Turkish Les Benjamins, Karaca Home, and Kazakh Gaissina have closed all their stores. The area occupied by clothing stores in shopping centers has decreased by 15% over the year, according to STC calculations.

source: The Moscow Times https://archive.is/VlLmg

Slovakia, one of Gazprom's last major clients in the European Union, is ready to sign a long-term contract with Azerbaijan for the purchase of natural gas, said Deputy Prime Minister and Minister of the Environment Tomáš Taraba. "We are discussing a long-term contract with Azerbaijan, for at least 10 years. Slovakia wants to diversify its energy supplies, and Azerbaijan is a very reliable partner for us," Taraba said.

According to him, the main problem is the supply of resources from the Caucasus to Central Europe, but the parties are currently discussing "which pipelines can be used and in what volumes." Taraba also thanked Baku for its support during the disruption of Russian gas imports. "During the supply crisis, for example, from Ukraine several months ago, your country was very active in ensuring supplies to Slovakia," Taraba said.

Previously, Martin Huska, CEO of SPP, Slovakia's largest oil and gas producer, said Slovakia was negotiating a long-term gas contract with Azerbaijan's SOCAR. He noted that Bratislava had begun searching for new suppliers "capable of delivering the necessary volumes of natural gas at reasonable prices" in light of the phased cessation of gas imports from Russia. Azerbaijan had already launched gas supplies to Slovakia in 2024 under a pilot contract. The terms of the agreement, including export volumes and prices, were not disclosed.

Slovakia and Hungary remain the last EU countries directly purchasing Russian gas. Until January 1, 2025, they received the fuel via transit through Ukraine, but after that transit was halted, gas began flowing through the Turkish Stream pipeline. Last September, Slovakian Prime Minister Robert Fico stated that the country receives approximately 3.5 billion cubic meters of Russian gas per year. After meeting with Fico in May of this year, Vladimir Putin promised that Moscow would "do everything to meet the energy needs of the Slovak Republic."

Last year, Gazprom's supplies to the European market fell to 18 billion cubic meters—the lowest level since 1973. Compared to 2024 levels, export volumes are down 44% and more than tenfold compared to pre-war peaks.

On February 3, a ban on Russian gas imports came into effect in the EU, but a transition period is provided for existing contracts. LNG supplies are to be completely stopped on January 1, 2027, and pipeline gas supplies on September 30, 2027. Slovakia opposed these restrictions. Fico called the EU's plan to wean itself off Russian gas "shooting itself in the knee." In late April, Bratislava filed a lawsuit in the EU Court of Justice against the ban on Russian gas imports.

source: The Moscow Times https://archive.is/XiBz1

Russians' time deposits in banks decreased by 288 billion rubles in March, according to an RBC analysis. This is the first outflow of funds from deposits since October 2022, when people were in a panic over the mobilization of funds. As a result, the total amount of Russians' bank deposits increased by only 0.3% over the month, and only due to current accounts, the Central Bank noted. According to its data, long-term deposits with terms exceeding one year experienced the greatest decline.

Experts cite the primary reasons for this decline as falling interest rates, which is causing some savings to flow into other financial assets or be spent on expensive durable goods, as well as people's need for cash due to internet outages and problems with non-cash payments. In March, car sales grew by 30.6% year-on-year, and by 15.1% in April after a decline in January-February. The amount of cash in Russian hands increased by 0.3 trillion rubles, and by another 0.6 trillion in April.

The majority of the money Russians keep in banks is in deposits: 46.9 trillion rubles out of 67.4 trillion as of April 1, according to the Central Bank. However, people have long since stopped depositing new money, according to a study by Frank RG. In 2025, the savings market (term deposits and current accounts of individuals) grew almost entirely due to accrued interest – 15.5%, while the inflow of new capital accounted for only 0.4% of growth. A year earlier, interest accounted for approximately 60% of the total growth.

The Civil Code allows people to withdraw money at any time, even from a term deposit, with only the interest being lost. However, most Russians' deposits have maturities of less than six months; it's sufficient to wait until they reach their maturity date and not open a new one. Deposits with terms longer than one year that expired in March were likely opened in late 2024 or early 2025. At that time, deposit rates were at their peak, and have now returned to their November 2023 levels.

Against the backdrop of high interest rates last year, the share of income going to savings (the savings ratio) reached a historic high of 16.6%. However, as rates decline, the savings ratio will also decrease, and more funds will flow into the consumer market, according to Economic Development Minister Maxim Reshetnikov. Economist Yegor Susin noted that a gradual release of some excess savings is underway. One could see a slight shift of some savings into demand for cars, but this is expected to happen as rates decline, he believes.

A Frank RG study found that 27.5% of Russians would not abandon their deposits even if yields declined, 24.8% would consider alternative products in such a scenario, and 21.2% would begin spending their accumulated savings.

Deposit rates have closely matched Russians' inflation expectations. "It's too early to say that deposits have lost their appeal. But it's a fact that they are declining," MMI analysts wrote, expecting depositors' interests to shift toward the stock market, durable goods, and housing.

Russians are increasing their investments in bonds. In March, they purchased 139 billion rubles worth of corporate bonds, 157 billion rubles worth of bonds in April, and another 80 billion rubles worth of OFZs, becoming the largest buyers of government securities on the secondary market.

The Central Bank hasn't yet released its April results, but preliminary data suggests the outflow of funds from deposits has ceased, but there's no sign of an inflow either. New deposits and accounts of Russians, according to the Central Bank, totaled 1.2 trillion rubles, but this is the result of early social payments before the May holidays. The inflow of ruble funds from households into banks accelerated due to current accounts, the Central Bank writes, but "the balances in the term segment have not changed significantly."

source: The Moscow Times https://archive.is/J2Jvm

Russian housing builders are on the brink of crisis. The margin of safety that had been accumulating until mid-2024, while the mass preferential mortgage program at 8% per annum was in effect, has been exhausted, said Deputy Prime Minister Marat Khusnullin. "We've already used up our margin of safety. We can't be pressured any further; going any further poses risks to the industry," he warned.

Khusnullin is sounding the alarm regarding the decline in mortgage issuance following the tightening of terms for the most popular preferential program, family mortgages, in February. This, he said, "will significantly impact the construction market." He previously stated that the industry needs 4-5 trillion rubles in mortgages issued annually: "This is the minimum figure at which... the industry will not collapse."

According to the Central Bank, 620 billion rubles in mortgage loans were issued in February-March, compared to 425 billion rubles in January, the last month under the old terms of the state family program. If issuances remain at this level, they will end the year at the lower limit of the minimum stated by Khusnullin.

Khusnullin calls the decline in housing completions at the beginning of the year "the negative consequences of the cooling of mortgages" starting in 2024. According to Rosstat, housing completions in Russia grew by only 0.3% last year, and in the first quarter, they decreased year-on-year by 28.2% to 23 million square meters. Construction has a long investment cycle, the Deputy Prime Minister recalled, so the results of 2023's work were visible in 2025, "and the effects of 2024 will become apparent in 2026." Only 18 regions have not allowed a decline in housing completions, the Deputy Prime Minister noted.

The contraction of the mortgage market has affected construction activity. According to Dom.RF, 18% fewer projects were launched in April than a year earlier. For the first four months, launches increased by 18%, but this result was largely due to the January surge, when launches increased by 30% year-on-year.

Given the long and undulating cycle, Khusnullin urged that during periods of decline, preparations must be made for a new recovery. This will not be easy, given that last year he noted the risk of bankruptcy for 20% of developers and warned that this share would increase to 30% if citizens did not continue to invest in real estate.

The Central Bank, however, considers the portfolio quality to be good, and the problems of individual developers are not systemic. According to its data, developer lending is steadily growing: as of April 1, their project finance debt amounted to 11.5 trillion rubles. However, the situation clearly worries the regulator: at the end of April, it promised to tighten the rules for reserving loans for multi-apartment construction. The new approach will be "more risk-sensitive" and will take into account "factors determining the successful completion of the construction project and the repayment of the project loan."

source: The Moscow Times https://archive.is/mXHst