BSR Policy Briefing 6/2025

Economies of St Petersburg and Leningrad Oblast by 2025: Present-day Picture
By Nikita Lisitsyn

St. Petersburg is the second largest city in Russia, and together with Leningrad Oblast (or Region) it forms the second largest regional agglomeration in the country. Economies of St. Petersburg and Leningrad Oblast have their regional peculiarities, defined by their structure and potential, including their demography, domestic markets, and most developed industries and companies. On the other side, these two economies follow general trends of Russia’s economy as a whole. The long-term trend in Russian economy since 2013-2014 until 2020 could be defined as stagnation, as the average GDP growth rate was below 1% year-on-year, with some years of higher dynamics mixed with several years of slight economic recession. This phenomenon was based on an exhaustion and ineffectiveness of the economic model, which had formed during the booming period of 2000-ies with high commodity prices, constantly growing real incomes, rapidly growing Russia’s GDP - and regional GDPs of the reviewed regions increasing even faster, that the national average. Real incomes in Russia within this period remained lower than in 2013, and more moderate oil prices and weaker investment activity added to this stagnation picture. However, since the post-COVID recovery year of 2021 and the start of military conflict with Ukraine in 2022 economic growth in Russia accelerated, and real incomes of the residents increased. This growth trend was evoked by a combination of neo-Keynesian policy (especially in industrial sector) internally alongside with some positive external effects of economic sanctions, accompanied by the rise of commodity prices in 2021-2023. Despite this short-term positive impact, it failed to solve some basic problems of Russia’s economy. Some of the earliest signs of crisis are already visible enough: Bank of Russia’s key rate is 21%, some of the industries demonstrate decline, the affordable mortgage is suspended nationwide, high inflation persists. In these new circumstances St. Petersburg’s economy seems to be more vulnerable than the economy of neighboring Leningrad oblast, as the city is more dependent on internal demand, and presently is less dependent on industrial production. State interference in forms of subsidized loans, additional budget stimuli, etc. is constrained due to increasing budget deficit and lower export incomes. The authorities presently try to rebalance the economy by shifting it to a so-called “soft landing” mode primarily by monetary and fiscal leverages; however, the return to stagnation paradigm seems less probable due to growing economic imbalances.

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