Russia's industry enters phase of structural stagnation – intelligence

That is according to Ukraine's Foreign Intelligence Service, Ukrinform reports.

Industrial output in Russia grew by only 0.8% year-on-year in January-November 2025. This figure reflects an almost complete loss of momentum amid tighter sanctions, a high key interest rate, and declining private investment.

Formally positive dynamics were sustained by a narrow group of sectors directly linked to the state defense order.

"Such a concentration of growth masks a systemic decline in civilian segments of the economy and deepens structural imbalances," the Foreign Intelligence Service said.

According to intelligence, budget injections remain the key source of support for industry.

This year, Russia's budget spending on defense exceeds $172 billion, while only about $56.1 billion is allocated to the economy, of which 50-70% effectively serves the needs of the defense industry. This increases the dependence of industrial dynamics on state resources and narrows opportunities for market-driven development.

The majority of manufacturing sectors not integrated into state defense orders are in decline. Output reductions have been recorded in metallurgy, the chemical industry, machine building, and the food industry. The drop is particularly sharp in civilian machine-building products – from tractors and bulldozers to passenger railcars, elevators, and automobiles. This points to the degradation of domestic investment demand.

A model based on defense spending is unsustainable, while persistently high interest rates and sanctions pressure block private investment and technological modernization.

"Under these conditions, even official growth forecasts for 2026 look more declarative than reflective of the real state of the economy," the Foreign Intelligence Service said.

Photo: Defense Intelligence of Ukraine