Russian economy flags economy slowdown
(MENAFN) Russia’s economy is losing momentum and requires lower borrowing costs to reignite growth, according to Herman Gref, CEO of Sber, the country’s largest bank.
Since the escalation of the Ukraine conflict in 2022, Russia has faced extensive Western sanctions aimed at isolating its economy. Despite these measures, the economy has often exceeded expectations, with GDP growth of 4.1% in 2023 and 4.3% in 2024. However, the Economic Development Ministry now anticipates growth slowing to 2.5% this year, while the central bank’s medium-term forecast projects a more cautious 1–2% expansion.
Speaking at the Eastern Economic Forum in Vladivostok, Gref suggested that the key interest rate could be lowered from 18% to roughly 14% by year-end, but warned this would not be enough. “At current inflation levels the economy could only recover at 12% or lower,” he said, describing the second quarter as a period of “technical stagnation” and stressing the need for timely action to prevent a recession.
Gref added that a weaker ruble later in the year could benefit exporters and support the budget. Echoing his concerns, Economic Development Minister Maksim Reshetnikov noted that growth was slowing faster than expected and that forecasts were being revised. Earlier, Reshetnikov had warned that Russia was nearing a recession, dependent on policy measures such as interest rates.
President Vladimir Putin cautioned that sharp rate cuts could trigger higher prices but expressed confidence that inflation—currently at 8.8%—could be reduced while keeping economic growth on track.
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