Russia's economy: are we facing a recession? Experts warn!

Russia's economy: are we facing a recession? Experts warn!

At the International Economic Forum in St. Petersburg (SPIEF), Russian Economy Minister Maxim Reshetnikov described the country's current economic situation as worrying. He said that the Russian economy is in a period of slowdown and is on the verge of slipping into recession. This assessment is based on current business sentiments that signal a threatening trend. Reshetnikov emphasized that avoiding a recession depends largely on future political decisions.

During his speech, the minister called for continuous adjustment of the existing economic growth model, while avoiding revolutionary changes. He also expressed his wish to the head of the central bank, Elvira Nabiullina, not to overdo it in the fight against inflation. Reshetnikov made it clear that although the reduction in inflation was significant, he was critical of the overemphasis on the inflation target of 4 percent by 2026.

Impressions from Other Government Officials

Finance Minister Anton Siluanov agreed with Reshetnikov and also described the current state of the economy as a “period of slowdown.” He expressed that “after the cold comes summer,” suggesting a recovery that may be imminent. Similarly, Siluanov called for technological sovereignty for Russia to strengthen economic resilience.

The head of the central bank, Elvira Nabiullina, spoke of an “overheated recovery” and pointed to the depleted resources that are hindering growth. She shared that companies are suffering from a labor shortage and recommended a new growth model to address the challenges.

Inflation and growth forecasts

The Russian statistics agency Rosstat reported that annual inflation fell to just under 9.5 percent in May. The central bank expects inflation to be at 7 to 8 percent by the end of the year, with the 4 percent target achievable in 2026. In terms of economic expansion, both the government and the Bank of Russia forecast weaker GDP growth in 2025 compared to 2024, which is 4.3 percent. The Ministry of Economic Development estimates growth of just 2.5 percent.

Furthermore, the Bank of Russia's medium-term forecast calls for GDP growth of just 1.5 percent. These clear declines in growth were used as an opportunity by President Vladimir Putin, who in March acknowledged an inevitable slowdown in the economy, to call for cautious action. He warned against risking an excessive slowdown in the economy.

The combination of these factors suggests that the Russian economy is facing a critical testing phase in which it will be necessary to repeatedly prove that the path out of the slowdown can be successfully mastered. However, the above developments provide confidence that the right measures are being taken to address future challenges and create more stable economic conditions.

Further information on these topics can be found at Russia Capital and SWP Berlin.