Russian Economy Poised to Resume Growth Despite Drone Strikes

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomePMN BusinessRussian Economy Poised to Resume Growth Despite Drone StrikesRussia’s economy likely grew in the second quarter after its first contraction in three years, but an escalating wave of Ukrainian drone attacks deep inside the country threatens to derail the fragile recovery.Author of the article: You can save this article by registering for free here. Or sign-in if you have an account.2uu8j9nrdvj8vphfv79(1vua_media_dl_1.png Bloomberg, Russian Federal Stati(Bloomberg) — Russia’s economy likely grew in the second quarter after its first contraction in three years, but an escalating wave of Ukrainian drone attacks deep inside the country threatens to derail the fragile recovery.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountGross domestic product expanded by 0.9% in April-June from a year earlier, according to the median estimate of economists surveyed by Bloomberg, after declining in the first three months of the year. Russia’s Federal Statistics Service will release the data Wednesday at 7 p.m. Moscow time.Surging government spending that is outpacing budget plans has continued to drive the wartime economy, while double-digit wage growth has buoyed resilient consumer demand even as it has added to pressure on corporate profits. A favorable calendar with more working days likely also lifted annual growth, reversing a drag on the previous quarter.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againKeeping Russia’s economy growing amid the war in Ukraine, now in its fifth year, remains a key concern for President Vladimir Putin, who has repeatedly urged officials to shore up activity. The rebound may prove short-lived as Ukraine steps up the intensity and reach of attacks on production sites, oil refineries, logistics networks and other critical infrastructure.Military-linked manufacturing remained the strongest performer in the economy, particularly among industries that produce drones and missiles. The government has continued to ramp up procurement spending, which rose 39% in the first seven months of the year, according to Finance Ministry data.Household consumption has also bucked the broader downturn, expanding by more than 7% in the second quarter from a year earlier, according to the Economy Ministry, as wage growth fueled by fierce competition for blue-collar workers has only recently begun to slow. Other manufacturing sectors have continued to contract, with oil refining the biggest laggard. Ukrainian drone strikes have curtailed operations at several major facilities, and the disruption has triggered fuel shortages across much of the country that the government has struggled to contain. The fuel crunch has added to a fresh acceleration in inflation, which is expected to land above 6% as of the end of July, according to the Bloomberg consensus. Bank of Russia Governor Elvira Nabiullina’s team has once again pushed back its expected timeline for bringing inflation closer to the 4% target by another year.The pressure has mounted since the quarter ended. Ukraine has escalated strikes on Russia’s oil-processing industry this month after a brief lull in the second half of July gave refineries time to carry out repairs and boost fuel supplies. Kyiv’s forces attacked five Russian refineries last week alone.At the same time, Ukraine has targeted warehouses of Russian e-commerce giant Wildberries, causing inventory losses for thousands of small businesses. This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Putin said last month that the overall economy and key sectors remained resilient despite attempts to disrupt the energy industry, describing problems in the fuel market as temporary. A new supply shock threatens to cut short the second-quarter rebound, and even officials don’t expect the momentum to last if refinery outages continue. The central bank sees growth slowing to around 0.5% this quarter and has cut its full-year forecast to 0%-1%. That suggests output could stagnate because of what policymakers described as a decline in production capacity in some segments.What Bloomberg Economics Says…“Russia’s first-quarter slump proved brief, but what followed is hardly a rebound. Upcoming GDP data should reinforce the picture of a soft landing after the war-related boom. We expect growth to hover around a lackluster 1% in the second half of 2026 and into 2027. Looming fiscal tightening and an easing, but still-restrictive, monetary stance should keep the economy from gaining much momentum. Drone strikes have so far had a limited impact on overall activity, but remain a material downside risk.”— Ekaterina Vlasova, CEE & Russia EconomistPolicymakers have previously warned refinery shutdowns can curb crude output in addition to fuel production, as exporters can’t always quickly redirect unprocessed oil to foreign markets. Meanwhile, disruptions are spreading to wholesale trade and freight transportation, affecting an even broader range of industries. The minutes from the central bank’s last policy meeting showed officials were concerned that if government efforts to stabilize the fuel market through imports and the redistribution of domestic supplies fall short, the drag on other sectors could become larger and more persistent.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.