During a plenary session of the St. Petersburg International Economic Forum (SPIEF) in St. Petersburg, Russia, on Friday, President Vladimir Putin clearly instructed all those present that Russia’s economy must not slide into recession “under any circumstances”.
"Our most important task is to ensure the economy's transition to a balanced growth trajectory," Putin said in a keynote speech at the forum.
"Balanced growth is moderate inflation, low unemployment, and continued positive economic dynamics... At the same time, some specialists and experts point to the risks of stagnation and even recession. This should not be allowed under any circumstances," he said.
Consumer inflation in Russia is at around 10 per cent currently, more than double its 4 per cent target. The country’s gross domestic product (GDP) growth slowed to 1.4 per cent year-over-year in the first quarter, the lowest quarterly figure in two years.
In October last year, the Bank of Russia hiked its key interest rate to its highest level since the early 2000s in a bid to curb inflation. It finally reduced it by one per cent last month, bringing it down from 21 per cent to 20 per cent.
Yet, there is mounting pressure on the central bank to lower interest rates further to encourage borrowers and stimulate activity in other sectors, including manufacturing, construction, and agriculture.
MUST READ: https://newsarenaindia.com/economy/canada-to-impose-reciprocal-tariffs-on-us-metals/48020
More than three years since it invaded Ukraine in February 2022, Russia had shown impressive resilience in economy despite the West’s sweeping sanctions and the Kremlin spending heavily on military empowerment.
Large recruiting bonuses for military enlistees and death benefits for those killed in Ukraine have put more income into the country's poorer regions. But, a lack of foreign investments and inflation are looming large over the economy, threatening to stifle it.
German Gref, CEO of Sberbank, Russia’s largest lender, expressed worry at “not financing a single new project since the new year”.
Alexey Mordashov, steelmaker Severstal's largest shareholder, said steel consumption was down 14 per cent in January-May compared with the same period of 2024.
"We are on the brink of a serious credit servicing crisis...and the number of bankruptcies is growing," Mordashov said, adding that certain businesses were downsizing or shutting down.
On Thursday, Russia’s economy minister Maxim Reshetnikov had warned that the country may be on the verge of a recession. Monetary policy decisions, he said, would decide whether or not Russia slips into an economic slump.
“The numbers indicate cooling, but all our numbers are (like) a rearview mirror. Judging by the way businesses currently feel and the indicators, we are already, it seems to me, on the brink of going into a recession," Reshetnikov said.
Deputy Prime Minister Alexander Novak described the current economic slowdown in the country as "painful."
Speaking at the SPIEF, Novak, who oversees Russia's key energy portfolio in the government, advocated for interest rates to be reduced to stimulate activity.
Russian Central Bank Governor, Elvira Nabiullina, has not bowed to demands of further rate cuts. Credited with steering Russia through a serious of crises since being appointed in 2013, Elvira has also faced criticism from lawmakers and prominent businessmen over high interest rates or rouble volatility.
Russia's Finance Minister Anton Siluanov also spoke on Friday about the economy "cooling" but noted that after any cooling, "the summer always comes."
"This cooling is a serious problem right now," Mordashov said. "And to continue with this (monetary) policy is fraught with the intensification of these negative consequences."
Follow us
