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Putin’s economic miracle or Gref’s perfect storm”? Russia in crisis mode!
Russia's economy is on the brink of recession. Experts warn of inflation and high interest rates, while President Putin remains optimistic.
Putin’s economic miracle or Gref’s perfect storm”? Russia in crisis mode!
The economic situation in Russia is causing mixed reactions and disputes between the government and experts. While President Vladimir Putin talks rosy about the current situation and claims that economic growth is above that of most other countries, Sberbank boss German Gref is warning of a "perfect storm" of problems heading for the Russian economy. According to Focus the signs point to recession and Gref, as one of the country's key economic leaders, is skeptical about the future.
Gref reports rising inflation, currently at 9.9 percent, as well as high key interest rates, which were reduced from 21 percent to 20 percent in June. However, this interest rate policy, which is being pursued by the central bank, has come under sharp criticism. Experts warn that these high interest rates are preventing companies from making necessary investments. The Sberbank boss's assessments contradict Putin's optimistic statements and show a clear picture of economic uncertainty.
The forecast for 2025: A decline is imminent
The current figures for overall economic production are alarming. As can be read on [Ostexperte](https://ostexperte.de/russland-hohe-leitzinsen-in-der-kritik-und- Growth-soll-sich-2025-halbieren/), overall economic production has fallen since May, even if there is a slight increase in gross domestic product (GDP) compared to the previous year. For 2025, the forecasts are bleaker, with economic growth falling from 3.5 percent in 2024 to just 1.8 percent in 2025.
While the Ministry of Economic Affairs has forecast growth of 4.2 percent for the first nine months of 2024, there are growing concerns about stagflation. Consumer prices continue to rise, as shown by the 9.1 percent increase in July and August 2024 or 8.5 percent in October. Analysts are therefore calling for an interest rate cut to 15 to 16 percent by the middle of 2025 in order to slow down the negative development. However, the central bank plans to cut interest rates only when inflation falls, which could be reduced to 4.5 to 5.0 percent by December 2025.
The uncertainties and the look ahead
On the political stage it is clear that there are increasingly different opinions on future economic policy in Russia. Focus reports that Economics Minister Maxim Reshetnikov is also warning of an impending recession and is urgently calling for a reduction in the key interest rate. Despite these calls, the central bank remains committed to its strict interest rate policy.
Vasily Astrov from the Vienna Institute for International Economic Studies highlights that there is a certain freedom in economic policy debates in Russia, which explains the different views of government members. This uncertainty in the political and economic landscape could have an impact on the willingness to invest and the business climate.
It remains to be seen whether and how the Russian economy will find its way out of this dilemma. The coming months promise to be turbulent, and while some players firmly believe in a turnaround, others are concerned about developments.