Economic minister urges central bank to ease monetary policy
Russia’s Economy Minister Maxim Reshetnikov warned Thursday that the nation is teetering on the edge of a recession, as soaring interest rates strain businesses and investment. Speaking at the St. Petersburg International Economic Forum, Reshetnikov said the country’s economic trajectory now depends heavily on upcoming monetary policy decisions.
“We are already, it seems to me, on the verge of going into recession,” he said, though he later clarified that this outcome is not yet certain. “From here on out, everything will depend on our decisions.”
Calls for rate relief as borrowing costs remain high
Russia’s key interest rate stands at 20%, a level the Kremlin admits is deliberately restrictive. While the central bank made its first rate cut since 2022 this month, businesses continue to report that borrowing costs are choking investment. Reshetnikov appealed directly to Central Bank Governor Elvira Nabiullina, calling for support to “give the economy some love.”
High rates were introduced to rein in inflation amid an overheated economy dominated by wartime production. However, economic analysts say the civilian sector is stagnating, and government-aligned think tanks are warning that most non-military industries are already in recession.
Split views on cooling versus collapse
Governor Nabiullina defended the current slowdown as a necessary correction, saying it represents a “way out of overheating.” Finance Minister Anton Siluanov added a hopeful note, saying that “summer always follows a cold snap.”
Others are less optimistic. Sberbank’s First Deputy CEO Alexander Vedyakhin said in a Reuters interview that tight monetary policy risks pushing the economy into “over-cooling,” and called for rates to be cut to 12-14% to revive investment lending.
Outlook grim for civilian sector
The Centre for Macroeconomic Analysis and Short-Term Forecasting stated this week that there is no clear path to renewed economic growth, describing the situation as an “economy of stagnation.” Despite official inflation remaining near the 4% target, civilian industries are showing signs of contraction, while the military sector continues to dominate economic activity.
President Vladimir Putin previously cautioned against turning the economy into a “cryotherapy chamber,” a metaphor for excessive cooling caused by restrictive financial policy. Whether policymakers respond with decisive rate cuts may determine whether Russia avoids slipping into a broader recession.
