The Russian economy virtually came to a standstill in the second quarter of 2025. A state of "technical stagnation" is observed.
Points of attention
- Technical stagnation has gripped Russia's economy in the second quarter of 2025, leading to minimal growth and stagnation in various sectors.
- Geopolitical factors, ruble exchange rate fluctuations, and falling commodity prices are major contributors to the economic standstill observed in Russia.
- The high key rate of the Central Bank of the Russian Federation, currently at 14%, is identified as a significant barrier to economic growth and lending stimulation.
Russia's economy virtually stopped in the second quarter of 2025
This was stated by the head of the largest bank in Russia, Sberbank, German Gref.
"The second quarter can actually be considered as technical stagnation. July and August show quite clear symptoms that we are approaching zero," Gref said at the Eastern Economic Forum in Vladivostok.
He noted that this was caused by a combination of geopolitical factors, fluctuations in the ruble exchange rate, and falling prices on commodity markets. As a result, business activity slowed down.
Gref emphasized that the main factor limiting growth remains the key Central Bank rate. It currently stands at 14%, and this level is insufficient to stimulate lending.
According to his assessment, economic recovery is possible only if the rate is reduced below 12%. Otherwise, the risks of recession, i.e., a decline in the economy, will increase.
Gref emphasized that it is not even the nominal rate that is important, but the real one, which in Russia is currently one of the highest in the world.
The head of Russia's Sberbank also reported that the loan portfolio may start growing only in the second half of 2025. This requires easing monetary policy by at least 200 basis points.
According to Gref, the Russian economy remains under pressure from a variety of factors, including sanctions, uncertainty in global markets, and rising business costs.
He warned that without adjusting fiscal policy, the economy risks being stuck in a stagnation zone for a long time.
The International Monetary Fund expects that after two years of military boom, the Russian economy will return to its usual state of stagnation and continue to lag behind both developing and developed countries.
According to the IMF forecast for July 2025, this year the growth rate of Russian GDP will slow to 0.9% and to 1.0% in 2026. In 2024, growth was at the level of 4.1%.
Economic stagnation is a situation where economic growth is virtually non-existent or very weak for a long period of time. During this period, the level of production, employment, and income does not increase, and the economy does not develop.
A recession is a sharper and more pronounced decline in economic activity, usually measured by a decline in GDP.
