Russia's Cash Comeback: A Sign of Economic Strain

Russia's cash circulation has seen a significant surge since the start of the year, with a whopping 1.56 trillion roubles added to the economy. This is the largest increase in cash circulation during the same period, outside of the COVID-19 pandemic. The spike is largely attributed to the repeated mobile internet shutdowns across the country, aimed at countering Ukrainian drone attacks.

Having cash on hand gives you some sense of control and security in uncertain times.

As a result, many businesses, including pharmacies, restaurants, and corner shops, are increasingly opting for cash transactions to avoid paying taxes. This shift is not only affecting the state's ability to collect tax revenue but also pushing small and medium-sized businesses to the brink of collapse. The economic strain is evident, with the Russian economy ministry cutting its GDP growth forecast to 0.4% for 2026, marking the country's weakest economic growth since 2022.

The cash comeback is a stark reminder of the economic challenges facing Russia, with the country's oil and gas sector being the only bright spot. The government's efforts to boost revenues through higher taxes and lower VAT thresholds have only squeezed margins further, leading to a decline in consumer spending and a shift towards cash transactions. As the economy continues to struggle, it remains to be seen how long this cash comeback will last and whether the government will take steps to address the underlying issues.