The Kremlin’s massive spending on its war effort spurred growth after it launched the full-scale assault in 2022 and helped Russia buck predictions of an economic collapse.

But the spending spree pushed up inflation, weighed on parts of the economy not connected to the conflict and pushed Russia’s external debt to its highest level in 20 years.

Last year Russia’s gross domestic product (GDP) grew by just one percent and officials had been predicting another sluggish expansion in 2026 even as the economy shrank at the start of the year.

On Wednesday, Putin told a government meeting on economic affairs that the “trajectory” of growth was “currently below expectations”.

“Below not only the expectations of experts and analysts, but also the forecasts of the government itself and the Central Bank,” Putin said.

“Statistics show that economic growth has, unfortunately, been declining for two months in a row. Overall, GDP contracted by 1.8 percent in January-February,” Putin said.

He added he was expecting “proposals for additional measures aimed at resuming growth in the domestic economy”.

Russia’s state finances have been strained by the costs of the war and pressure on its vital energy exports since Putin ordered troops into Ukraine in 2022.

Moscow’s budget deficit in the first three months of 2026 was the equivalent of US$60 billion, or 1.9% of GDP — a bigger shortfall than it planned for the entire year.

The war in the Middle East has offered Moscow some financial relief, with the International Energy Agency saying Tuesday that Moscow nearly doubled its earnings from oil exports in March.