Russian President Vladimir Putin gestures during a meeting with representatives of international news agencies on the sidelines of the St. Petersburg International Economic Forum at the Constantine Palace in St. Petersburg, Russia, on Thursday, June 4, 2026. (Alexander Kazakov, Sputnik, Kremlin Pool Photo via AP)
Russia's Vladimir Putin will address a flagship investment forum in Saint Petersburg on June 5, as the war in Ukraine drags the economy into stagnation and days after brazen Ukrainian drone strikes rocked his home city.
Russia's offensive has led to rising prices, tax hikes, two-decade-high borrowing costs, business shutdowns and labour shortages, putting the economy in its trickiest spot since the start of the war in 2022.
Meanwhile, intensifying Ukrainian attacks on Russia's vital energy infrastructure — oil depots, refineries, exporting hubs — are threatening to dent Moscow's most important income stream.
In a highly symbolic strike, one attack hit a facility in Saint Petersburg as the conference opened on Wednesday, with arriving dignitaries greeted by a plume of back smoke in the background.
"The Russian economy is entering a stagnation, with high interest rates and high inflationary pressure," Alexander Kolyandr, a London-based Russian economy expert, told AFP on the eve of Putin's speech.
"I don't see the Russian economy entering the 1990s or something similar, it's just a slow degradation of everything," he added.
Russia's GDP contracted by 0.2 percent in the first three months of the year, according to official statistics — the first quarterly slump in three years.
And the government posted an $80 billion budget deficit in the first four months of 2026 — equivalent to 2.5 percent of annual GDP and more than was planned for the entire year.
'Russian Davos'
The Saint Petersburg International Economic Forum (SPIEF) was once dubbed "Russia's Davos".
Western investors keen to make a buck in Russia's chaotic and fast-growing economy would gather to strike deals and hobnob with the Russian elite in the early years of Putin's rule.
But since the assault on Ukraine, it has become a marker of the ex-KGB spy's new place in the world.
Drones and machine guns are put on exhibition display.
Guests from the likes of China and Saudi Arabia are now the top attendees. Americans and Europeans are few and far between.
Their slimmed-down ranks led by figures such as former Hollywood actor turned Putin-backer Steven Seagal, American conspiracy theorist Candace Owens, and MPs from the right-wing Alternative for Germany party.
Putin has previously used the event to insist the state can handle the billions being pumped into the military campaign, bash Western sanctions as a form of self-harm and insist that life at home will remain stable.
But in recent months, many Russians say life has become more expensive, as the economic costs of the war spread.
Asked by AFP about Russia's economic woes, the Russian leader on Thursday channelled Mark Twain.
"Rumours of my death have been greatly exaggerated," he said, rejecting the idea Russia was on the brink of a full-blown crisis.
The "slow degradation" of the economy would be irreversible unless the Kremlin made "political decisions" such as ending the war and restructuring the economy, expert Kolyandr said.
Russia has run a "two-tier" economy since the start of the war, prioritising the state-dominated defense industry above everything else, he said.
While higher oil prices off the back of the Iran war have increased Russia's revenues, it has not been to the extent needed to refill the state budget, he added.
Labour shortages are also biting, with some 30,000 men a month being recruited for the war.
"There is no good solution," Kolyandr said.
"They will continue to kick the can for as long as possible."
