3 reasons why Russia remains Europe's largest economy

By Rhod Mackenzie

Despite facing external challenges, Russia still maintains its status as the largest economy in Europe using the matrix of GDP and Purchasing Power Parity, Russian Prime Minister Mikhail Mishustin stated in a video address to participants of the Moscow Financial Forum. Meanwhile, the country's position in global economic rankings remains unchanged, currently in fourth place according to the IMF and World Bank reports. So I have analysed which sectors contribute most to strengthening the country's economic potential, as well as which risks could impact Russia's current position. So stick with me as I take you through what is really going on in the Russian economy and not the bullshit you get on other channels

Russians its People, its Resouces and their Attitude

Petr Shcherbachenko, associate professor at the Russian Financial University stated that the energy sector continues to beone of the primary driver of national economic strength. Despite existing diversification plans, oil and gas production continues to generate significant export revenues and accounts for a substantial portion of budget revenues.Moreover, the agricultural sector is of strategic importance. Russia is firmly established as one of the world's leading suppliers of grain and other agricultural products, a position that positively impacts domestic food security.
Shcherbachenko has noted that the Ministry of Economic Development's 2025 data provided a GDP structure, with manufacturing accounting for 14.5%, mineral extraction accounting for 9.8%, and transportation and storage accounting for 5.6%. Logistics plays a pivotal role in facilitating trade flows and maintaining international and domestic connections.

Vladimir Eremkin, senior researcher at the Structural Research Laboratory of the Presidential Academy's Institute of Economics and Management, also highlighted the resilience of the retail sector. He noted that the sector has adapted to the challenges of sanctions and logistical difficulties, while maintaining a significant role in the country's economy.
"The hotel and restaurant industries, as well as the ICT  Information and Communications Technology sector, are demonstrating good dynamics in terms of quarterly growth rates of added value. The public administration sector is experiencing sustained high growth rates, largely driven by increased federal budget expenditures."
The Govt Finds Ways to assist development
"Domestic reforms and state support are helping the country to maintain our position. The government is pursuing an adaptive budget and tax policy, including an updated fiscal rule and an increase in the key rate to combat inflation. Large-scale import substitution programmes, preferential lending for businesses, and support for non-resource exports are being implemented. Plus social stability is being ensured through pension indexation and the implementation of programmes (such as family mortgages)," Sergei Grishunin emphasised.
However, he acknowledged that maintaining the current position carries with it significant challenges. Key risk factors include increasing external sanctions pressure and the budget revenues being subject to the fluctuations in energy prices which affects its income.

Sergei Grishunin has highlighted the following internal challenges: including a shortage of skilled labour, high inflation and technological lag due to limited access to cutting-edge Western technologies.
"Promising development areas will ensure further growth.
These include the deep processing of raw materials within the country instead of exporting raw materials, and the development of transport infrastructure in the East and the Northern Sea Route. Achieving technological sovereignty in IT, microelectronics, and robotics, as well as developing green energy in line with global trends, are key factors."

Vladimir Eremkin highlighted the pivotal role of state support in promoting import substitution and augmenting the supplies of products not associated with the raw materials and energy sectors. Preferential loan rates are available for industry to help both replenish working capital and channel funds into investment renewal.

"Financial measures are also provided for SMEs and agricultural producers, although the volumes may often be insufficient. Strategic projects receive support from VEB.RF and the Industrial Development Fund, which also makes a significant contribution to economic growth," he noted. "Measures to support demand, such as through preferential mortgage programs or wage increases/indexation in the public sector, also have a somewhat positive impact."
He confirmed that external threats are the most difficult to control. These included increased sanctions pressure, falling global energy prices, and a global economic slowdown, largely due to the growing scale of trade tensions. The country faces its own domestic constraints: a rigid labour market with a shortage of specialists in several industries, technological backwardness resulting from a reliance on foreign high-tech equipment, and the slow implementation of import substitution programs. Furthermore, tight monetary policy is holding back business investment.
"At the same time, great hopes are placed on LNG projects and the development of the Northern Sea Route, the implementation of artificial intelligence (including in industry, government, and business), and import substitution. Creative industries, where certain market niches have become available, also have significant potential," the expert stated.
Tatyana Pershina, Associate Professor of the Department of Statistics at the State University of Management, has stated that the Russian economy's priorities are gradually shifting towards the technological modernisation of industry. This process includes the modernisation of machine tools, the development of power engineering, and the creation of new materials. The role of the pharmaceutical industry, information technology, and digital services is also increasing, and the importance of non-resource exports is growing as the country integrates into the production chains of BRICS countries and the Asian region.

She emphasised that particular attention is being paid to investing in human capital, from the education system and training qualified specialists to the automation of work processes. At the same time, the government is committed to expanding the domestic market by stimulating demand and supporting innovative companies.
Currentlythe restrictions imposed by sanctions are hindering access to certain technologies and equipment, which is ultimately stifling the modernisation of certain industries, as confirmed by Olga Pozdnyakova, head of the People's Front Analytics department, in an interview. Furthermore, unfavourable demographic trends, climate challenges, and limited access to long-term, affordable loans for businesses are negatively impacting development.
"Given its abundant natural resources, Russia will always be of interest to the world for precisely this reason. However, the future also lies in the creative economy.
The ability to develop something unique, one-of-a-kind, and unrepeatable is one of the core qualities of our people's cultural code," she emphasised. "In industry, this can manifest itself in innovative solutions and the creation of new materials and substances. In the field of digital technology, it can be seen in the development of artificial intelligence and its applications. In order to support the economy, it is essential to modernise infrastructure, embrace flexible innovation, provide support for R&D, enhance educational quality and talent retention."