At the end of 2025, a BBC journalist walked the streets of Russia asking ordinary people what they hoped for in the coming year. A striking number answered with a single word: peace.
Not prosperity. Not stability. Not victory. Peace.
This was despite the fact that the Kremlin had officially declared pobeda – victory – as the word of 2025. Several people also said they had stopped making plans. One summed up the mood with quiet precision: “Five years? If I look ahead ten days, it’s good.”
That sentence is the most accurate economic indicator Russia has produced in four years. When people stop planning for the future, it means that uncertainty and exhaustion have set in at a level that no official statistic can capture. The Kremlin’s economic numbers tell one story. The lives of ordinary Russians tell another. This article is about the second story.
The Surface and What Is Beneath It
The official narrative is reassuring. Russia’s GDP grew in 2023 and 2024. Unemployment is low. Shelves are stocked. The ruble has not collapsed. Wages in some sectors – particularly anything connected to the military – have risen sharply.
The surface holds. But beneath it, the structure is cracking.
After two years of wartime expansion driven by military spending – growth of over 4% in both 2023 and 2024 – Russia’s economy slowed to roughly 1% in 2025. The IMF forecasts 1% for 2026. The Economic Forecasting Institute of the Russian Academy of Sciences projects 0.7% for 2025 and 1.4% for 2026. Even analysts close to the Kremlin are now warning that these conditions could push the country into recession during 2026.
The mechanism is straightforward. Military spending pumped money into the economy and created demand. But military spending does not increase the supply of consumer goods. It adds to inflationary pressure without adding to the things people can actually buy. The sugar rush from wartime stimulus is now fading. What remains is the hangover.
The Interest Rate That Froze Everything
To understand daily life in Russia in 2026, you have to understand one number: 21%.
That was the Bank of Russia’s key interest rate at its peak – the highest in decades, reached in late 2024 as the central bank tried to control inflation that military spending had ignited. In March 2026, after seven consecutive cuts, the rate stood at 15%. Central Bank governor Elvira Nabiullina has been praised internationally for her management of monetary policy. Inside Russia, those interest rates have frozen ordinary economic life.
A mortgage at market rates costs roughly 23-29% per year. Only 8.3% of working Russians – roughly one in twelve – can save the required 20% down payment within two years, according to Sberbank’s own deputy chairman. Housing affordability fell 60% between March 2020 and September 2024. For the vast majority of Russians under the age of 40, homeownership has become functionally unreachable.
A business loan at 21% is not a tool for investment. It is a path to bankruptcy. Companies across Russia stopped borrowing to expand. Fixed capital investment fell 2.3% in 2025 – the first real decline since 2020. You cannot grow an economy while starving it of credit.
The Housing Trap
Housing is the sharpest point of contact between the macroeconomy and daily life, and the story of Russia’s housing market is one of the most revealing economic stories of the war era.
In 2020, as the pandemic hit, the government launched a subsidized mortgage program offering home loans at 8% – far below market rates. The program was a success by its own terms: demand surged, new construction boomed, developers thrived. Between 2020 and 2023, the average price of a new apartment nearly doubled.
In July 2024, the program was cancelled. Almost overnight, mortgage volumes plummeted. Market rates jumped to 29%. New home sales in the region surrounding Moscow fell 50% in a single month. Mortgage issuance across the country fell 40% in 2024, and experts forecast a further 20% decline in 2026.
The consequences are spreading in every direction. Developers who borrowed heavily to build apartments now have inventory sitting unsold – 46% of new constructions built in 2025 had not been fully sold by the end of the year. Some developers are offering deferred payment schemes – low rates for the first few years, soaring rates later – that analysts have compared to the subprime mortgage structures that triggered the American financial crisis in 2008. The head of Russia’s National Builders’ Association expects developer bankruptcies to begin in 2026.
For renters, the squeeze is equally painful. As buyers exit the market, demand for rentals surges. Rental prices rose sharply in 2024 and 2025. For young Russians in Moscow or St. Petersburg who cannot afford to buy and are seeing their rent rise year after year, the future looks like an indefinite waiting room.
The Tax Burden That Arrived with the New Year
On January 1, 2026, Russia’s VAT rate rose from 20% to 22%. The government also lowered the revenue threshold at which businesses are required to register for VAT, from 60 million rubles to 10 million – pulling hundreds of thousands of small businesses into the tax system for the first time.
Additional levies on finished electronic goods – laptops, smartphones, lighting products – followed. Administrative fines were raised across multiple categories. The government is simultaneously planning a windfall tax on several industries.
The mechanism being applied is familiar from wartime economies everywhere: the state needs more money than it takes in, so it increases the burden on households and businesses. The result, as EUvsDisinfo noted, is simple: higher prices and less money left in household budgets.
Food prices increased 21% in early 2026. Services rose 14%. Fuel prices climbed 11% following refinery disruptions caused by drone strikes on Russian oil infrastructure. The headline inflation figure of around 6% masks the speed at which essentials are becoming more expensive.
The Labor Market: Numbers That Lie
Russia’s unemployment rate is officially low – below 3% at various points in 2025. This number is politically important to the Kremlin and technically accurate by narrow definitions. It is also almost completely misleading about the state of the Russian labor market.
The low unemployment figure reflects several things that have nothing to do with economic health. Hundreds of thousands of men have left the civilian labor force to fight in Ukraine – either through mobilization or voluntary enlistment driven by financial incentives. Hundreds of thousands more have fled the country entirely. Both groups exit the unemployment statistics. The labor market tightens not because the economy is creating good jobs, but because the pool of available workers has shrunk dramatically.
The consequences are visible across the economy. Construction sites are short of workers – a shortage made worse by restrictions on labor migration from Central Asia, intended partly to pressure migrants into military service in exchange for simplified citizenship. Healthcare is short of staff. Small businesses struggle to find employees at wages they can afford to pay.
Meanwhile, the workers who remain in the civilian economy are being asked to pay for a war through higher prices, higher taxes, and an interest rate environment that makes borrowing almost impossible.
“Concrete Currency”: What Russians Do With Their Money
Russians have always had a complicated relationship with financial institutions. Memories of the savings wipeouts of the 1990s, the 1998 default, and the 2008 crisis have created a deep-seated reluctance to trust banks with money over the long term. The wartime period has reinforced this instinct.
Cash held by Russians rose by 2 trillion rubles in a single year. Real estate – what Russians call betonny valiut, concrete currency – remains the preferred store of value for those who can afford it, even as housing affordability collapses. Surveys conducted for the Central Bank consistently find that real estate is one of the two most preferred investment options for ordinary Russians, second only to deposits at Sberbank.
The psychology underlying this is not irrational. In an environment of high inflation, high interest rates, a war that could change economic conditions overnight, and a state that has demonstrated it can seize private assets with minimal legal justification, putting money into an apartment feels safer than putting it into financial markets or leaving it in a bank account.
But the housing market is now broken in ways that make even this traditional refuge unreliable. Buying an apartment at current prices, with current mortgage rates, is a bet that rates will fall significantly before the deferred payment periods on developer installment schemes expire. If rates do not fall fast enough, a wave of defaults could follow – and Russia does not have the regulatory infrastructure to manage a housing crisis at scale.
The Regional Divide
The economic picture varies enormously by location. Moscow’s economy is not Russia’s economy.
Moscow absorbed over 260,000 additional residents between 2021 and 2025, as the war accelerated the long-running concentration of educated, mobile workers in the capital. Wages in Moscow rose 45.9% over the same period – multiples of what happened in most regional cities. In Moscow, the cafes are open, the shops are stocked, and the surface of normal life is reasonably well maintained.
In Belgorod, Kursk, and Bryansk – border regions within drone and artillery range of Ukraine – tens of thousands of residents have left. In the national republics like Bashkortostan and Buryatia, which have borne a disproportionate share of military casualties, the economic impact of losing young men is felt in every village. In Russia’s small cities and towns – the country’s equivalent of the American Rust Belt – the pre-war trends of industrial decline and demographic loss have accelerated.
The regional dimension also explains why military enlistment bonuses have had real economic impact in poorer areas. A one-time payment of several hundred thousand rubles, plus a monthly salary that can exceed regional median wages, is a genuinely life-changing offer for a young man in a depressed regional economy with no other path to economic mobility. The war is consuming Russia’s poorest young men partly because it is the best economic offer they have received.
“We Will Reach December”: The Psychology of Now
The phrase that best captures the Russian economic mood in 2026 is not an official slogan. It emerged organically from conversations among ordinary people: doydem do dekabrya – we will reach December. Not “we will win.” Not “we will recover.” Just: we will survive until the end of the year and then see what happens.
This is the psychology of a population that has decoupled its personal planning from any national narrative. The Kremlin talks about victory and historical destiny. The average Russian talks about whether they can make rent, whether their mortgage payment will be manageable next quarter, whether the price of eggs will keep going up.
The two conversations are happening in parallel, in the same country, almost without intersection.
What ordinary Russians know – even if they cannot say it in public – is that the economy they are living in is not the one the government describes. The wartime growth of 2023 and 2024 was real, but it was bought with debts that are now coming due in the form of higher taxes, higher prices, and an interest rate environment that has locked most people out of any meaningful financial progress.
The man who told the BBC he was happy if he could see ten days ahead is not describing despair. He is describing a rational adaptation to an environment where the future has become genuinely unpredictable – and where making long-term plans feels not ambitious but foolish.
What Comes Next
The Iran war oil price windfall has temporarily eased the Kremlin’s fiscal crisis – but as the articles in this series have noted, economists across the spectrum agree it cannot fix the structural damage. The civilian sector is contracting. Labor is short. Credit is expensive. Housing is unaffordable. The tax burden is rising.
The Bank of Russia is cutting rates – slowly, cautiously, aware that cutting too fast risks reigniting inflation. If the cuts continue and reach levels that bring mortgage rates below 14-15%, a modest housing market recovery could begin in late 2026 or 2027. If oil prices fall again, or the war in Iran ends and the windfall disappears, those cuts will slow or stop.
The real danger, as EUvsDisinfo noted, is not a dramatic collapse. It is a slow, exhausting decline with fewer buffers left each year. An economy built around permanent war spending, discounted oil exports, sanctions evasion, and the steady consumption of financial reserves is not built on a sustainable foundation.
The Kremlin can keep the surface intact for a long time. Russia has deep reserves – of money, of tolerance for hardship, of historical experience with worse. But the surface is increasingly all that is being maintained. Beneath it, the concrete currency is cracking.
And somewhere in that reality, a Russian man is counting ten days forward and calling it planning.
Sources: The Moscow Times, EUvsDisinfo / Kyiv Post, Bank of Russia, Economics Help, RFE/RL, Meduza, The Bell, Russia Post (mortgage analysis), Dom.RF, Global Property Guide, BBC (Steve Rosenberg interviews), Trading Economics