russia’s Civilian Sector Has Lost the War for Resources to the Military-Industrial Complex

According to results for the first half of 2026, russian industry has effectively stopped growing. Despite the official 0.4% growth reported by “rosstat”, the civilian sector continues to shrink, and the overall statistics are propped up solely by the military-industrial complex.

Official data show that the extractive industry saw a 0.5% decline in production. The pro-kremlin center for macroeconomic analysis and short-term forecasting has also acknowledged that by the end of the first half of the year, industry had entered a period of stagnation. In June, total output was by 1.2% lower than a year ago, while civilian industries cut production by 2.1%. Compared to the monthly average for 2024, the decline reached 3.9%. The reasons remain the same: high interest rates, labor shortages, weak domestic demand, and concentration of resources on military production.

The sharpest decline was recorded in the basic industries. Oil refining fell by 7.7% over the year, while output of petroleum products in June plummeted by 21.8% compared to the same month in 2025. Production of construction materials decreased by 6.3% due to the crisis in the construction sector. 44 out of 61 cement plants are already at risk. The metallurgy sector lost 9.3% of its output, indicating weak demand even within the country.

The kremlin is keeping industrial statistics from falling thanks to defense industry enterprises, which have priority access to budget funds, raw materials, equipment, and personnel. The rest of the industrial sector is operating under the opposite conditions: more expensive financing, a shortage of workers, a decline in orders, and a worsening financial situation. As a result, the gap between the military and civilian sectors continues to widen.

It is telling that even the central bank of the rf no longer expects economic growth. The regulator has lowered its forecast for 2026 to zero, effectively acknowledging that russia’s economy may end the year with zero GDP growth.