![](\"https:\/\/fortune.com\/img-assets\/wp-content\/uploads\/2026\/05\/GettyImages-2274603626-e1778350916870.jpg?w=2048\")
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The Russian economy is now shrinking, and businesses are having more trouble keeping up with debt payments, representing a potentially systemic threat to the country\u2019s bond market.<\/p>\n
According to data from the central bank this week, GDP contracted 0.5% year over year in the first quarter, far below projections for 1.6% growth, due in part to an increase in the value-added tax the Kremlin imposed to pay for its war on Ukraine. <\/p>\n
That\u2019s despite a series of rate cuts from the central bank, which has kept borrowing costs relatively high to fight war-related inflation. <\/p>\n
With economic activity slowing and rates still high, more Russian companies have missed debt payments. There were 11 technical defaults in 2024, 24 in 2025, and already 11 in just the first three months of 2026, according to Izvestia<\/em>.<\/p>\n Sources told the Russian newspaper that nearly 25% of the bond market is now at risk of default as businesses that borrowed at low rates must refinance at much higher ones. <\/p>\n The volume of debt that needs to be rolled over this year is about double from last year, adding pressure on cash flows and raising competition for liquidity, according to the report, which cited a source that called the default problem a systemic trend.<\/p>\n At the same time, the U.S.-Israeli war on Iran has increased logistics costs for Russian companies and stoked more inflation, reducing the central bank\u2019s scope to lower rates further.<\/p>\n Warnings have been building for months. Last June, Russian banks raised red flags on a potential debt crisis\u00a0as high interest rates weighed on borrowers\u2019 ability to pay off loans. Also that month, the head of the Russian Union of Industrialists and Entrepreneurs warned many companies were in \u201ca pre-default situation.\u201d<\/p>\n The Center for Macroeconomic Analysis and Short-Term Forecasting, a state-backed Russian think tank, said in December the country could face a banking crisis by October if loan troubles worsen and depositors pull out their funds.<\/p>\n Earlier this year, Russian officials told Putin that a\u00a0financial crisis could hit by the summer\u00a0amid spiraling inflation.\u00a0In fact, Russian statistics show that nonpayments of commercial bills hit a record high of $109 billion in January.<\/p>\n But President Vladimir Putin has largely been missing in action on the economic front. While he scolded ministers on TV last month about shrinking GDP and appeared at the annual Victory Day parade on Saturday, he has been spending less time in public view.<\/p>\n Instead, Putin spends more time in underground bunkers micromanaging his\u00a0war, paranoid about a coup or an assassination attempt by Ukrainian drones, sources told the Financial Times<\/em>. <\/p>\n The Kremlin\u2019s internet blackouts, which have raised howls among ordinary Russians, are due in part to Putin\u2019s security concerns and anti-drone measures.<\/p>\n \u201cPutin spends 70% of his time running the war and the other 30% meeting [someone like] the president of Indonesia or dealing with the economy,\u201d one person who knows him told the FT<\/em>, adding that the only way to get more access is by \u201cdoing more war.\u201d<\/p>\n With Western military aid and innovations from Ukraine\u2019s now-thriving domestic defense industry, Kyiv has weakened Russia\u2019s economy and military. Long-range drone strikes deep into Russian territory have damaged key oil-export hubs and \u201cshadow fleet\u201d tankers transporting sanctioned crude.\u00a0<\/p>\n At the same time, new drone technology is also\u00a0giving Ukraine a battlefield advantage, helping to roll back Russian troops, who have also been cut off from Starlink internet connections that were vital to their own drones.<\/p>\n The quagmire in Ukraine and persistent inflation have weighed on sentiment. Even a survey from Russia\u2019s state-owned pollster showed Putin\u2019s approval rate has fallen to 65.6% from 77.8% at the start of the year and prewar levels well above 80%.<\/p>\n \u201cThe overall mood is that\u2019s enough already; you\u2019ve been fighting for long enough,\u201d a Russian official\u00a0told the\u00a0Washington Post<\/em>\u00a0recently on condition of anonymity. \u201cIt seems to everyone that it\u2019s been going on for longer than World War II, the Great Patriotic War\u2014and at the same time we can\u2019t even take one region.\u201d<\/p>\n<\/div>\n #Russian #debt #defaults #surging #Putin #hides #bunkers #fixated #war #economy<\/p>\n","protected":false},"excerpt":{"rendered":" The Russian economy is now shrinking, and businesses are having more trouble keeping up with debt payments, representing a potentially systemic threat to the country\u2019s bond market. According to data… <\/p>\n","protected":false},"author":1,"featured_media":2371,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[113,4210,772,4207,781,4211,4209,4208,631,2587,2287,2584,446],"class_list":["post-2370","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance-news","tag-bonds","tag-bunkers","tag-debt","tag-defaults","tag-economy","tag-fixated","tag-hides","tag-putin","tag-russia","tag-russian","tag-surging","tag-ukraine-invasion","tag-war"],"_links":{"self":[{"href":"https:\/\/gw.adampg777.com\/index.php?rest_route=\/wp\/v2\/posts\/2370","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gw.adampg777.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gw.adampg777.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gw.adampg777.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/gw.adampg777.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2370"}],"version-history":[{"count":0,"href":"https:\/\/gw.adampg777.com\/index.php?rest_route=\/wp\/v2\/posts\/2370\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/gw.adampg777.com\/index.php?rest_route=\/wp\/v2\/media\/2371"}],"wp:attachment":[{"href":"https:\/\/gw.adampg777.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2370"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gw.adampg777.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2370"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gw.adampg777.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2370"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}It\u2019s the economy, stupid<\/h2>\n