WIIW Sees Russia's Economy in Crisis – Economists Cite High Interest Rates, Attacks, and Internet Shutdowns as Causes

For the current year, the WIIW expects only stagnation. "Laut der jüngsten Prognose des Wiener Instituts für Internationale Wirtschaftsvergleiche (wiiw) stagniert das Wirtschaftswachstum dieses Jahr bei 0,6 Prozent", the experts write. The current situation is mainly due to the overly restrictive monetary policy of the central bank in Moscow, which "die Wirtschaft abwürgt" because it makes loans too expensive, said WIIW Russia expert Vasily Astrov.

Which factors triggered the crisis

The Ukrainian attacks on Russian energy facilities and the resulting problems with fuel supply also harmed the economy, Astrov said. "Die Investitionstätigkeit brach demnach im ersten Quartal um 14 Prozent ein", the institute reports. Additionally, "der Internetsperren" weigh on the economy, causing significant problems for the heavily digitalized Russian economy.

Despite the economic weakness, Russia remains capable of financing the war against Ukraine, according to the WIIW's assessment. "Trotzdem bleibe Moskau weiter in der Lage, den Angriffskrieg gegen die Ukraine fortzusetzen und zu finanzieren", the analysis states. The experts see state control of the economy as the main reason for this.

Better prospects in the eastern EU countries

The WIIW forecast for the eleven eastern EU countries is significantly more positive. "In den elf östlichen EU-Ländern erwartet das wiiw ein Wachstum von 2,2 Prozent (2026) und 2,4 Prozent (2027) – deutlich stärker als die erwarteten Werte der Eurozone", the economists report. "Der Trend werde vom privaten Konsum, von EU-Geldern und von Investitionen in die Rüstungsindustrie angetrieben", the institute writes in its economic forecast.

At the same time, the region's industry, which is intertwined with Germany, continues to struggle with the German industrial crisis, it said. "Insgesamt prognostiziert das Institut ein robustes Wachstum in Mittel-, Ost- und Südosteuropa – trotz des Iran-Konflikts", the experts write.

Ukraine: Growth despite multiple burdens

The forecast for Ukraine itself is more subdued. "Für das Bruttoinlandsprodukt der Ukraine prognostizieren die Fachleute einen Anstieg von 1 Prozent in diesem Jahr und 2,5 Prozent im nächsten Jahr", the WIIW reports. "Der im April bewilligte EU-Kredit von mehr als 90 Milliarden Euro stabilisiere aber die ukrainische Wirtschaft, so das wiiw."

At the same time, the country suffers from several burdens: "Die Ukraine leide nicht nur unter den Angriffen auf seine Energieanlagen, sondern auch unter den Auswirkungen des Iran-Kriegs, hieß es. Das Land sei von Treibstoff- und Düngerimporten abhängig, die durch die Blockade der Meeresenge von Hormus teurer geworden seien."

Significance of the WIIW forecast

The news about the WIIW analysis was broadcast on 01.07.2026 on the Deutschlandfunk program. This marks the first widely received external expert forecast in three years that explicitly describes Russia's economy as "in crisis."

The Vienna economists' diagnosis is considered an important sentiment indicator because the WIIW is one of the few Western institutes that regularly publishes detailed data on Russia. Should the restrictive monetary policy of the central bank in Moscow continue, the experts expect a continuation of the stagnation and ongoing pressure on the ruble.