Jens Asbjørn Bøgen
It’s the latest in a whole line of high-level warnings.
It’s the latest in a whole line of high-level warnings.
What is happening?
Russia’s economy has effectively stalled, according to German Gref, head of Sberbank, the country’s largest bank.
Speaking at an economic forum on Sept. 3, Gref described the April–June 2025 period as one of “technical stagnation,” noting that recent GDP growth trends are nearing zero.
From war boom to economic bust
The slowdown reveals the limitations of Russia’s war-driven economic momentum.
While record levels of defense spending helped boost output earlier, weak private consumption and declining civilian investment are now dragging growth down
GDP growth flatlines in Q2
Russia’s GDP grew just 1.8% in the second quarter of 2025, up only slightly from 1.4% in the first.
While technically still expanding, this marks a significant slowdown compared to the more robust figures seen in 2024.
Central bank predicts further cooling
The Central Bank of Russia has signaled that growth is likely to weaken further in the coming months.
Officials expect economic activity to slow sharply in the third quarter and potentially flatline by the end of 2025.
The outlook is clouded by high interest rates and fading domestic demand.
IMF slashes Russia’s growth forecast
The International Monetary Fund (IMF) has sharply revised its 2025 forecast for Russia, cutting expected GDP growth to just 0.9%.
That’s a dramatic drop from the 4.3% growth recorded last year — and the steepest downgrade among the world’s major economies.
High interest rates weigh on recovery
Gref pointed to Russia’s benchmark interest rate, now at 18%, as a major barrier to recovery. Despite two cuts earlier in 2025, borrowing costs remain high.
Gref argued that a further reduction to around 12% would be needed before there’s any real “hope for an economic recovery.”
Warnings from inside the Kremlin
Top officials have been sounding the alarm for months.
Central Bank Governor Elvira Nabiullina warned in June that Russia had reached “the edge of capacity,” while Economy Minister Maxim Reshetnikov recently admitted the country is “on the verge of a transition to recession.”
GDP growth nearly stalls over summer
Reshetnikov added more recent data to the bleak outlook. He told state TV that year-on-year GDP growth was just 0.4% in July, following a 1% rise in June.
He also noted that producer price inflation had ceased — typically a sign of waning demand — calling it “not a very good sign.”
Factories cut hours, avoid layoffs
Manufacturers across Russia are showing signs of strain. According to Reshetnikov, many engineering plants are running under capacity.
Some have shifted to four-day workweeks, others to full weeks, but nearly all are cutting costs, including labor.
“Clearly, we are not talking about layoffs, but this is a worrying sign for us,” he admitted.
Public concern shifts toward economy
A Levada Center poll in June found 58% of Russians now cite rising prices as their top concern — compared to just 33% naming the war in Ukraine.
