All are equal, but some are poorer
What do regional economic differences indicate?
Author: Tatyana Rybakova
There's a unifying trend across regional economies today: inflation is slowing, not because demand is satiated, but because it's declining. People have less money, and even less confidence in the future. As a result, people are increasingly saving, primarily cutting out unnecessary expenses. However, regional differences are not only significant, but they also clearly demonstrate how regions with a high "war premium" and metropolitan areas, where financial flows are concentrated, are benefiting.
It's getting a bit colder
In general, the regions suffer from the same problems. According to Central Bank reportPrices are rising, and so is inflation. While inflation in March remained broadly flat (5,9%), sustainable inflation (independent of seasonality) increased in March – the current price level in March was 6%, compared to 5,8% in February. Naturally, the highest price increases are seen in goods on which the government has raised excise taxes. Services are experiencing significant price increases across the board (8,8%), although this is down from 9,4% in February. Non-food prices have begun to rise more sharply (6% in March after 4,6% in February), while food prices have slowed (4,1% compared to 4,3% in February). Food products are the ones that have had the greatest impact on the decline in the overall price index. However, there are some peculiarities.
According to ROMIR research group, consumer strategies are changing.
People are increasingly cutting out unnecessary spending, focusing on basic needs, and increasingly choosing discounted items and shopping at hard discounters.
One of the victims of this strategy was the enterprises Catering industry: Major players in the sector are massively cutting back their outlets in Moscow and the regions. Moreover, by refusing to visit cafes and restaurants, consumers do not switch to cheap “street” food. fast food – it is also experiencing difficulties. It is negatively affected by both rising food prices and the tax reform: fast food is the kingdom of small business, the tax reform has forced many successful entrepreneurs to switch to VAT as of January 1 of this year, resulting in a significantly lower tax burden for many. increased, which forces businesses to reduce volumes and raise prices. As a result, customers are dwindling—not everyone can handle the higher bills, even though prices now vary across regions. doubleIt was the catering industry that apparently became the main factor in the slowdown in food price growth, reducing demand for food purchases.
At the same time, focusing on basic needs, consumers have returned to purchasing essential industrial goods. For example, ROMIR notes, this includes household appliances. This was likely due to the fact that shoppers had been postponing essential purchases for the past four years, believing that the difficulties would only be temporary. Now it's clear that this is a long-term situation, and the situation is unlikely to improve even if the war ends. Meanwhile, four to five years is the typical time for some household appliances, especially small ones, to start breaking down. When your iron or the juicer you use to make your child's juice breaks down, it's hard to resist buying a new appliance. As demand grows, so do food prices.
Another common feature is the collapse of demand for housing and, accordingly, for building materials and furniture.
Reason - change terms of the "family mortgage": from February 1st of this year, only one parent can take it, the child must be registered with him/her, etc.
Finally, another common feature concerns industry—and, accordingly, employment and wage levels. Companies working for the war effort and government contracts (primarily in infrastructure construction) are doing well everywhere, while export-oriented companies are doing less so. Those focused on consumer goods (including those for the consumer sector) are in a rather difficult situation. There are no mass layoffs anywhere—that's not traditional in Russia—but wage arrears, wage reductions through bonus cuts, and a shift to part-time employment have become commonplace.
The result is a paradoxical situation: unemployment is at a record low (2,1%), and consumer incomes and, accordingly, consumer confidence Prices are falling. Frightened by the dim outlook, people begin to save even more, demand declines, and the consumer sector slides inexorably into a "death spiral," where costs require higher prices, and falling demand limits their growth.
How do manufacturers deal with this, well explained One of the owners of the same fast food chain: he raised prices, lost customers, and now relies on increased margins rather than increased turnover. Everyone understands that this is a dead end, ultimately leading to the death of the business, but entrepreneurial confidence Things aren't going well in Russia right now either, so everyone's mindset is to hold out as long as possible, nothing more.
Overall, it's safe to say that the economy continues to "cool," as the government likes to say. Of course, inflation is also cooling, but it seems only the Central Bank continues to be pleased. The pace of this "cooling," however, varies across the regions.
For whom is war...
Regions, like families, experience unhappiness in different ways, but happiness is the same for everyone: when there's stable state demand for their core products. And right now, the state wants, above all, weapons and everything related to war. Even the demand for infrastructure construction is primarily military: roads for transporting equipment, repairing structures destroyed by Ukrainian drones, building new workshops—primarily for the production of drones, electronics, and so on. Perhaps only the Moscow region maintains a high pace of civil construction, according to some sources. Central Bank report Regarding the regional economy. To a lesser extent, due to demand volatility and transport constraints, the presence of export-oriented industries helps regions.
Here, for example, the improvement in the Siberian regions, where coal mining is prevalent, is typical. The blockade of the Strait of Hormuz, which sharply reduced the flow of oil to the global market, led to increased demand for coal in China, one of the most important buyers of Siberian coal. As a result, coal production and exports improved slightly. Furthermore, oil refining also saw increased demand. If not for the decline in the pulp and paper industry due to lower demand in China, perhaps consumers would have also felt the improvement. However, for now, consumer activity continues to decline—although the restaurant industry, which has been suffering across Russia overall, has seen a slight recovery here. However, overall, depressed consumer activity is also weighing on inflation—in Siberia, it grew less than the national average in March (5,7%).
The Volga-Vyatka macroregion, however, saw the highest inflation in March – 8,2%. Moreover, it was here that the main increase in demand was concentrated in non-food goods. The reason is simple: this is where the main military production facilities are located, from drone production in Alabuga (Tatarstan) to numerous military factories.
As Central Bank analysts carefully put it, "companies with large volumes of government contracts generally rated their business activity and production capacity utilization higher." It is their employees, one might add, who accounted for the bulk of the growth in consumer demand: overall, even the mechanical engineering industry remains depressed—the growth in government contracts does not offset the losses from declining demand from the civilian sector.
…but transportation is expensive
Another sensitive issue is logistics. The "pivot to the East," which saw traditional supplies to Europe cut off with the onset of the war and forced many regions to transport goods across the country, competing for space on rail routes, has added new challenges: the logistics infrastructure of Black Sea and Baltic ports, primarily those designed for the transshipment of oil and petroleum products for export, is regularly disrupted by drone attacks. This isn't to say the attacks are tragic: even with the most successful hits, the extent of destruction is far less than with ballistic missiles, so restoring service is simply a matter of time and money. However, firstly, this increases transportation costs and makes delivery times unpredictable, which risks disruptions. Secondly, the value of the products destroyed in the ports is likely no greater than the value of the damaged port property.
Among the affected regions are the Northwestern regions, where cargo transshipment volumes have been steadily declining since January of this year. The Central Bank's report emphasizes the cold winter and ice cover as contributing factors, but coyly adds that "unscheduled repairs at terminals in the Leningrad Region had an additional negative impact on cargo turnover dynamics at Northwestern ports." As a result, some cargo is being redirected to the port of Murmansk, and attempts are being made to increase shipments via the Northern Sea Route. However, this is both more expensive and more complex, and the much-hyped Northern Sea Route can currently only operate during the short summer season and handles very modest cargo volumes.
Far Eastern ports, however, are thriving. Firstly, they handle the bulk of imported container cargo from Asia, and secondly, exports to Asia are also growing – including oil, petroleum products, and coal. As a result, container shipping prices increased by 18,5% in March, and by a quarter overall since November 2025. At the same time, shipbuilding and ship repair are growing – overall, employment and wages are good here. A weak fishing season due to bad weather was a letdown, but that's a seasonal thing.
Interestingly, this had a non-linear effect on consumer prices. For example, in the Northwest, St. Petersburg remained in the moderately elevated inflation zone (4-6%), while Arkhangelsk reached 2%. Meanwhile, the Vologda and Kaliningrad regions, as well as Karelia, experienced the highest inflation – over 8%. The average figure for the Northwest, however, is lower than the national average of 5%, but this is due to the significant contribution of St. Petersburg, which has not increased significantly in price. Overall, life has become more difficult for the region.
The Far East, while experiencing higher overall inflation (5,2%), was nevertheless largely in the zone of moderate to weak price growth: Yakutia, Chukotka, the Jewish Autonomous Region, Sakhalin, and Primorye were in the 4-6% range, while Magadan, Kamchatka, and Amur Oblast were below 4% and even below zero. Only Khabarovsk, which trades actively with China, accounted for the largest increase in inflation, at 6-8%. Overall, businesses in the region, like elsewhere, are complaining about falling demand, but interestingly, businesses here now associate the main risks not with government regulation, but with demand and the fluctuations in the ruble exchange rate. The Far East is clearly becoming a region more dependent on foreign trade with its neighbors than on distant Moscow.
Speaking of Moscow, inflation was elevated there – 6-8%, similar to the Smolensk, Yaroslavl, Tula, Oryol, Lipetsk, and Belgorod regions. However, in the Kostroma, Vladimir, Voronezh, and Tula regions, it was even higher – over 8%. Meanwhile, in the Tver, Bryansk, Tambov, and Ryazan regions, it was 4-6%, and in the Ivanovo region, 2-4%. The logic here isn't universally applicable: it's clear that Moscow, like St. Petersburg, is a magnet for capital and business activity, and while it's expensive, price increases are limited by intense competition. But why inflation is lower in the expensive, frontline Belgorod region or the "weapons-heavy" Tula region than in the depressed Kostroma or Vladimir regions remains unclear. Perhaps, in depressed regions, the process of the next stage of the decline in business activity has begun: when the majority of competitors have left the market, and those remaining raise prices in a monopoly manner, counting on the remnants of solvent demand, which has nowhere else to go.
Right to rest
Another industry that significantly impacts some regions is tourism. The increasing complexity of international tourism—from visa difficulties to rising transportation costs and the reduction of direct flights—has naturally increased interest in domestic tourism. But this has its own unique challenges.
For example, Lake Baikal and the Altai Krai are losing popularity, while the country's southern regions are performing well even outside the summer "beach" season. The reason is expensive flights. Flying to Lake Baikal or Altai isn't expensive, it's very expensive. Moreover, vacations there are primarily ecotourism, hunting, and fishing. In other words, they're not for the masses. Moreover, budget travelers can find cheaper, albeit lower-quality, alternatives within their own region.
At the same time, mass tourists are people who can afford a quality vacation, especially with their families, once or less than twice a year. In our cold climates, the only annual vacation naturally becomes a "beach" one—and today, the choice is limited: Turkey, which has become much more expensive; restless (and also already expensive) Egypt; the beaches of the Black Sea; and, to a much lesser extent, the Caspian Sea. Meanwhile, inexpensive Anapa will likely be disrupted for the upcoming summer season—there again... oil spillSochi is already more expensive than Turkey, Crimea is becoming dangerous (and some won't go for ideological reasons). The less-promoted beaches of Dagestan remain. However, there are more opportunities for skiing – and here the republics of the North Caucasus, where the authorities have been diligently developing ski resorts in recent years, are once again taking the lead. Meanwhile, Lake Baikal and Altai remain expensive, elite vacation spots – and our elite can afford to travel to EU countries, despite all the sanctions. As a result, the Altai Territory and Lake Baikal are complaining about declining demand (although Baikal is greatly helped by tourism from China), while the southern republics had a wonderful winter season.
Another industry that helps the economy of the southern regions is the concentration of fertilizer production here and the demand for them from agricultural producers.
According to the Central Bank, major investments are being made in new workshops and plants for the production of fertilizers and components. In the Volgograd region alone, a urea plant with a design capacity of 2 million tons per year (approximately 17% of Russia's current production) is under construction. However, fertilizer production is also the production of explosives—the components are similar. Ukrainian drones are already attacking similar plants, and there is no doubt that drone attacks will impact these regions.
Overall, southern Russia is one of the most challenging mega-regions. It faces high inflation (6,5%), with Dagestan making the largest contribution. It has seen the largest decline in industrial production since the beginning of the year (minus 10,7%) and a real collapse in housing construction (minus 36,3%)—worse only in Siberia (minus 43,6%). However, southern businessmen are the most optimistic: even the current business climate assessment, according to the Central Bank, although negative (minus 0,6), is still higher than most other regions. And expectations are simply off the charts: the coefficient of 14,5 is the highest in the country.
Time will tell how justified this optimism is. For now, it appears that the expectations of businesses in the "defense" Volga-Vyatka megaregion are much more justified: with the current business climate assessment at -8,9, the expectations factor is 10. Considering that local businesses also have some of the highest price expectations—20,5%—it can be assumed that they are primarily counting on increased government funding.
It seems that the "hand of the state" is today confidently beating the "hand of the market" in all respects – which is reflected in regional differences in economic conditions.
