Russia finally admits that their economy is gazing into the abyss

Putin does not think that the war in Ukraine is the reason for the economy looking worse.

What is happening?

During the St. Petersburg International Economic Forum (SPIEF) held last week, a remarkably honest statement hit the attendees when the Russian Minister for Economic Development, Maksim Resjetnikov, took the stage.

On the brink of recession

After two years of growth, the Minister warned that the Russian economy is “on the brink of recession” – a stark contrast to the statements from the Kremlin that the economy is doing great, besides Western sanctions.

Overshadowed by goals of the war

Since the Russian invasion of Ukraine i February of 2022, the domestic economy has been overshadowed by the goal of winning the war, but it seems that now that is about to change.

Massive spending on military

Part of the reason for the economic growth since the invasion is massive state spending on defense and military.

But times have changed, and the Russian Government now seem nervous about the future of Russia’s economy.

New investment projects on halt

Demand for credit is weak, said German Gref, CEO of Russia’s largest lender, Sberbank, said that demand for credit in Russia is weak.

“It is especially worrying that we, as the largest bank, which finances … almost 60% of all investment projects in the country, have not financed a single new project since the new year,” Gref said according to Reuters.

Getting worse by the day

According to Reuters, Sergei Aleksashenko, a former deputy governor of Russia’s central bank now living abroad, said few serious businesses would consider Russia as an investment destination even if the war were to end tomorrow.

“Everyone can clearly see the situation with property rights is getting worse every day,” Aleksashenko said.

Putin: “Must not be allowed to happen”

The Russian President, Vladiimir Putin, who also attended SPIEF, said that a recession “must not be allowed to happen”.

But he also explained that the war in Ukraine is not the reason for the situation.

Quoted Mark Twain

Putin quoted the late great Mark Twain, saying: “The reports of my death are greatly exaggerated.”

Then Putin went on to point to the fact that 43 % of Russia’s GNP comes from sectors not related to the war in Ukraine.

Experts: It has everything to do with the war

Not a lot of foreign experts agree on Putin’s point though.

Russia’s economy is, broadly speaking, made up of selling oil and gas and then spending the money on waging war.

This means that other sectors are being overlooked regarding new investments.