Russia's economy on the brink: Warning of impending recession!

Russia's economy on the brink: Warning of impending recession!

Russia's economy is facing a possible recession. This was warned by Economy Minister Maxim Reshetnikov during his participation in the Petersburg International Economic Forum (SPIEF). The minister's statements illustrate the tense economic conditions, which are largely caused by the ongoing war against Ukraine and the associated Western sanctions. Despite growth in recent years due to massive armaments, the situation is now tense. Reshetnikov explained that the economy is on the verge of recession, based on current business sentiments.

He sharply criticized the central bank's monetary policy and stressed that while a recession was avoidable, it depends heavily on policy decisions, particularly interest rates. The key interest rate has already been reduced by the Central Bank from 21 to 20 percent, but Reshetnikov warned that current interest rates are demotivating entrepreneurs to invest in their businesses. Forecasts indicate that investment in the third and fourth quarters could be below last year's levels.

The effects of the sanctions

The Western sanctions particularly affect Russia's raw materials industry. According to reports, Gazprom is suffering from massive losses that occurred in 2024, the first in 25 years after consistently positive financial statements. The loss of the European market and falling gas prices are making the situation even worse. The state gas company threatens to suffer further significant losses in 2025.

Additionally, there are indications that the majority of Russia's civil sectors are already in recession and there are no signs of economic growth yet. The Kremlin itself has stated that the current interest rate level is slowing economic activity. In addition, central bank chief Elvira Nabiullina demanded that a new growth model was necessary because many resources had already been used up. She rejects the accusations of faulty monetary policy and also predicts economic difficulties.

Looking into the future

Given the above factors, Russia's economic situation will remain tense. The need for adjustments in monetary policy and strategies to deal with sanctions is becoming increasingly clear. Experts warn that without fundamental changes to Russia's economic direction, the negative trends could be permanently reinforced. A looming decline in investment could further unsettle the country's already fragile economic balance.